Bacon's Rebellion

The Looming Mass Transit Apocalypse

Outside of a handful of the nation’s largest, densest cities, public transit in the United States is doomed, contends Randal O’Toole, a Cato Institute scholar, in a new analysis, “The Coming Transit Apocalypse.”

Nationally, commuter rail and buses already commandeer $50 billion a year in public subsidies to cover operating expenses, O’Toole says. The cost to the public will only grow as the industry grapples with billions of dollars in maintenance backlogs and unfunded pension and retirement healthcare liabilities. The coup de grace will come within five to ten years as driverless ride-hailing services provide greater convenience — door-to-door service — at roughly the same cost per mile as mass transit.

The industry response to these pressures, says O’Toole says, has been to seek ever bigger subsidies. Rather than throw good money after bad, he advises, municipal governments should plan for an “orderly phase-out” of publicly funded transit services.

O’Toole’s critique of the industry is especially timely for Virginians to ponder as the Commonwealth, along with Maryland, Washington, D.C., and the federal government patch together a rescue package for the fiscally ailing Washington Metro service. Do Virginia taxpayers want to saddle themselves with huge new obligations for a commuter rail and bus system that might not survive the driverless car revolution?

Transit is the most expensive and heavily subsidized form of travel in the United States, O’Toole says. In 2015 transit agencies nationally spent an average of $1.14 per passenger mile (only a quarter of which was passed on to passengers in the form of fares). That compares to 60 cents per passenger mile for Amtrak, 26 cents for driving, and 16 cents for flying. While massive subsidies have helped expand total transit ridership as the population has grown, urbanites are taking fewer transit trips per person than in the past.

Metro is an essential piece of transportation infrastructure in the Washington region, but nowhere near dominant. While Metro accounts for only 3.8% of overall metropolitan travel, according to O’Toole, 17.6% of commuters use it. The percentage rise to 28.1% in the central city.

Mass transit is a marginal contributor in Virginia’s smaller metros. In Richmond, buses accounts of 0.3% of all trips, 1.9% of commuting, and 5.5% of commuting in the central city. The numbers are comparable in Hampton Roads. Light rail and buses account for 0.4% of all travel, 2.0% for commuters, and 5.5% for central city commuters.

The declining price of gasoline in recent years has contributed to a fall-off of mass transit after it peaked briefly in the mid-2000s, says O’Toole. Lower-income people are especially sensitive to the price of gasoline, and when gas prices fall, many switch to automobiles. The fracking revolution has kept U.S. gasoline prices relatively stable in recent years, and O’Toole does not expect that to change any time soon.

Meanwhile, despite massive subsidies, mass transit agencies have racked up a maintenance backlog that federal officials estimated to be $87 billion nationally (in current dollars) in 2010 and $95 billion (in current dollars) in 2015. To eliminate the backlog within 20 years, 100% of funds now spent on improvements would have to be shifted to maintenance, O’Toole says. That shift is unlikely to ever take place, he adds, because politicians show a pronounced bias in favor of “ribbons over brooms” — headline-generating new projects over nitty gritty maintenance work.

Rail infrastructure has an estimated life of 30 years, after which time it needs to be thoroughly rebuilt or rehabilitated to avoid the risks of delays and accidents. Those are precisely the problems that have dogged the Washington Metropolitan Area Transit Authority (WMATA) as it allowed its maintenance backlog to grow, leaving it with $17.4 billion in unfunded capital needs over the next 10 years. As service and safety have deteriorated, the commuter rail system has been experiencing a steady erosion of riders and fares that has intensified the fiscal crunch.

WMATA is facing another disastrous predicament that has garnered relatively little attention: The agency has accumulated $1.027 billion in unfunded pension obligations and $1.767 billion in unfunded health care obligations. Those massive liabilities are over and above the authority’s unfunded maintenance needs.

When driverless cars become a reality, the cost of operating a ride-hailing service will be decline to the cost of operating the car, says O’Toole — about 40 cents per vehicle mile. “Door-to-door driverless service will also be far more convenient than transit, thus making transit inferior to shared driverless cars in every way.”

As riders shift to driverless ride-hailing services, the economics of mass transit will deteriorate even more rapidly: fare revenues will decline, maintenance backlogs will grow, and there will be more schedule delays, more safety incidents, more poorly maintained facilities, and more disillusioned riders.

How can municipal authorities respond to this ticking fiscal time bomb? First, says O’Toole, they can stop building fiscally unsustainable new projects. Second, as rail lines wear out, transit agencies should replace them with cheaper-to-operate buses. Third, plan express buses and bus rapid transit services that share lanes with other traffic rather than rely upon dedicated lanes. Fourth, make a priority of paying down debts and unfunded liabilities. And fifth, instead of subsidizing all passengers, convert subsidies into vouchers for lower-income riders.

Bacon’s bottom line: Predictably, transit agencies will do none of these things. Instead, they will lobby for bigger subsidies. The big question is how much tolerance taxpayers will have for pumping new money into a failed business model. My guess is that taxpayers will continue to be cajoled into paying continued subsidies until such time as driverless cars and jitneys take so much market share from commuter rail and buses that the impending collapse of public transit is obvious to all. Of course, by then, it will be too late to salvage much from the situation.

The only thing that can possibly save mass transit is a rapid evolution toward denser, mixed-use land use s along transportation corridors that would enable rail and bus to serve more riders and generate more fare revenue. That evolution is happening along Washington’s Metro system, but it is a slow, herky-jerky process that speeds up and slows down with business cycles and metropolitan booms and busts. Even then, I am highly skeptical that mass transit could ever pay for itself. If rail loses money in New York, it will lose money everywhere in the U.S. (Yes, yes, I know that roads and highways are subsidized, too, but the subsidies are much smaller per passenger mile. In any case, the road network should move to a pay-as-you-go system just as mass transit should.)

What seems absolutely foolhardy, given what we know now, is to double down on our commitment to new money-losing mass transit projects. State and local governments can sustain the fiscal drain for only so long. When they inevitably have to cut back — read my posts about Boomergeddon — the retrenchment will be all the more painful for riders, transit agencies and taxpayers alike.

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