The Heritage Foundation

Executive Summary #1389es on Smart Growth

August 1, 2000

August 1, 2000 | Executive Summary on Smart Growth

Competition, Not Monopolies Can Improve Public Transit

In the past 40 years, public transit has received stunning amounts of money from both the federal government and state and local governments. Since 1960, federal, state, and local governments have provided $385 billion to America's transit systems, including almost $150 billion in federal subsidies. At the same time, however, public transit's share of urban travel has plunged, from 7.1 percent in 1960 to 1.8 percent by 1998--a 75 percent drop in just four decades. Furthermore, public transit use is highly concentrated: 70 percent of transit ridership occurs in just seven metropolitan areas, with half of that in New York City alone.

Despite the evidence suggesting that transit is serving a smaller percentage of Americans, Congress continues to fund it at an increasing rate. The Transportation Equity Act for the 21st Century (TEA 21) will increase annual spending on transit from $4.6 billion in 1998 to $8.2 billion in 2003. The $41 billion spent in just those five years will make transit one of Washington's fastest growing spending programs.

Why does Congress continue to fund transportation programs that serve such small numbers of Americans at such a high cost? Part of the reason may be the claims of transit advocates, who assert that transit will "rebuild" America by relieving traffic congestion, saving the environment, and restoring intangibles such as neighborliness and small-town charm. Yet so few Americans use transit that it is unlikely to improve much at all.

Transit programs often promise to reduce traffic congestion, but this result is unlikely. Despite significant infusions of public funding, transit has made no progress in reducing traffic congestion. Indeed, given its minuscule market shares, there is virtually no potential for transit to reduce traffic congestion in today's dispersed, suburban-oriented cities.

Similarly, transit is unlikely to relieve pollution. Because urban rail systems do not materially reduce automobile use, they cannot materially reduce air pollution. New rail systems make only modest air quality improvements because they tend to draw riders primarily from buses and carpools. Increasing population densities, which some advocate as a solution to transit problems, will only make pollution worse.

While transit does not relieve congestion or reduce pollution, it will have two viable roles in the future. First, transit could play an important role in serving America's neediest citizens. Too often, when cities create light rail systems, they cancel or reroute existing bus lines to transit stations. This undermines the intra-urban bus transit service that benefits low-income groups. Integrating welfare reform efforts and transit improvements could benefit those most in need of public transportation. Second, transit plays a role today in seven major urban areas: New York, Chicago, Los Angeles, San Francisco, Washington-Baltimore, Philadelphia, and Boston. In these areas, transit has been and should remain a viable part of the total transportation infrastructure.

Although transit may be appropriate and competitive in a few cities, the current federal transit system does not necessarily serve these cities in a cost-effective manner. The federal transit system as it currently exists, with its costly mandatory labor contracts and monopoly dominance of the markets it serves, should be reformed to reduce costs and improve service for transit systems nationally. Two steps in particular would materially improve transit systems throughout the country:

  • Competitive Contracting. Competition within the transit market would benefit taxpayers and transit riders. All public bus and rail services should be converted to competitive contracting as quickly as possible. This could allow a combination of service expansions, fare reductions, and tax reductions.

  • Alternatives to Rail. Transit traditionally has focused on rail lines, but rail is often the most expensive and least efficient form of transit. Because of the extremely low densities of urban areas in the United States, transit's minuscule market shares, and the high costs of rail lines, rail systems are virtually never cost-effective relative to other transit solutions. Available capital funding should be used to fund more cost-effective projects that rely on bus rather than rail technologies, and cities should not build additional rail lines.

Such policies would improve transit's financial performance significantly and could arrest or even reverse transit's downward market share trend. For the nation's transit riders and taxpayers generally, this would be good news indeed.

Wendell Cox is principal of the Wendell Cox Consultancy in St. Louis, Missouri, and a former Visiting Fellow at The Heritage Foundation. He has written and consulted extensively on transportation issues worldwide.

About the Author

Wendell Cox Visiting Fellow
Thomas A. Roe Institute for Economic Policy Studies