Why Are Transit Costs High?

I’m sure that Robert Reich has forgotten more about economics than I have ever known or ever will know but in a recent post on public transport he makes the following claim about costs of public transport:

Even more absurdly, right now when it’s needed the most, public transportation across the land is being cut back. This is because transit costs are soaring by the same skyrocketing fuel prices that are forcing people out of their cars, at the same time transit revenues are shrinking because most transit systems depend largely on sales taxes, now dwindling as consumer purchases decline in this recession.

Uh, no.

Public transit systems are cutting back but they aren’t cutting back because fuel prices are rising, at least here in Chicago. Here’s the most recent Chicago Transit Authority budget and, yes, it complains about rising fuel costs. But that’s not what makes public transit expensive.

The CTA’s operating budget for 2007 was $1.079 billion. Labor expenses were $772.8 million (71% of the total) and fuel expenses were $68.6 million (6.3% of the total). The cost of employee benefits constitutes 27% of labor expenses. That includes things like health care and pensions. That 27% ($193 milllion) dwarfs the cost of fuel and is rising fast. Merely holding the line on the cost of employee benefits let alone cutting them would cover a good bit of the cost of more expensive fuel.

But this ties directly back to the point I made in the comments to James Joyner’s post that drew my attention to former Labor Secretary Reich’s post: public transit needs to decide whether it’s a means of employing people at high wages, a method of subsidizing the poor, or a means of moving masses of people around. It won’t be able to achieve all of those equally well.

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  • When I was in Chicago, I was a huge fan of public transit. Being downtown, the buses were fast enough and the cost low; the trains were fast and the cost low; and there was easy access from anywhere to anywhere, at least anywhere I wanted to go or be. Now I am moving to Virginia, and I was trying to use the public transit there. In short, it won’t happen.

    First, the metro is inconvenient. Let’s say I want to live near a metro line station, and walk to the station, then take the metro to near work and walk in. Well, that would only occasionally work, because the only place where stations are consistently near work is downtown. I’m inside the beltway, but apparently not inside enough: the nearest metro station would require an hour’s walk and crossing two major highways without sidewalks or bike lanes or, in one case, even a shoulder. I cannot take the risk of orphaning my kids to do something nice for the environment or to save gas costs.

    But I wouldn’t save money anyway, because second, the public transit is expensive, and somewhat unpredictably so. The cost of transit depends on the entry and exit points, rather than being a flat fee as in Chicago. To figure out the fares, you have to look at a chart posted in the station. (I suspect that the fares are the same in both directions, but I never verified that.) So if I am somewhere, and get on a bus or go into a metro station to go somewhere else, I may or may not know what it is going to cost me (on a bus, I am not sure I could even determine that in advance; I haven’t tried the buses). And since the card readers at the entry and exit points (remember, cost depends on the entry and exit points, so you have to put in your card at both ends) don’t display the credit remaining on the card, you cannot really be sure of whether you will have enough on your card to leave the station at the other end.

    But the costs are not simply difficult to predict and monitor: they are very high. If I park at the furthest station out to the northwest, and ride it in to the closest station to work, it would cost me almost $2 each way — except during rush hour, when it would cost me about $4 each way. Plus, $4.50 for parking when I leave! The total would be $12.50, which is sufficient for me to drive 30 miles each way, even in heavy traffic, at $4 per gallon, for the same cost. And that station furthest out is well under 30 miles from the office, about 12 miles.

    So if I cannot save money, can I save time? On the metro, even with the many stops, maybe. But not using the buses. Because the transit system is so expensive and so inconvenient, it’s not widely used enough to take many cars off the roads; and because the government bureaucracy is so large (requiring so many employees), there are many, many, many cars on the roads. (It doesn’t help that the highways and bridges are insufficient for the amount of cars on the road, either.) So the buses are always caught in traffic just like the cars are, and cannot get me there any faster (especially because I would have to walk after I got off the bus, whereas with my car I park adjacent to where I work).

    So at least in the DC area, moving a lot of people efficiently does not seem to be the system’s purpose. And it won’t be moving me much at all.

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