shock-shifting to transit, but not back

When some disruption or unusual event causes people to shift from driving to transit, many never shift back.  Ezra Klein  Brad Plumer reviews the evidence in the Washington Post. 

He's talking mostly about shifts caused by gas price shocks, but something similar happens in response to major disruptive events.  For example, the 2010 Olympic Winter Games in Vancouver caused a major burst in ridership — obviously a mix of Olympic visitors and residents who were trying to avoid Olympic traffic.  But ridership never dropped to pre-games levels, and in fact, 2011 ridership was higher than 2010, despite the huge influx of Olympic visitors in 2010.

Klein goes on to lament that the very fuel price volatility that affects transit ridership also affects transit's funding, since federal funding is based on fuel taxes so they drop when fuel use drops.  Unfortunately, US local operating funding (which is the real crux of the matter) is even more volatile, depending typically on payroll or sales taxes.  Loss of a job equals a drop in payroll taxes, and causes drops in spending shortly afterward.  

I wonder if we'll eventually create something like a property tax surcharge that captures some of the benefits of transit to a location — possibly based on some future, vastly more objective Transit Score or index of transit access.  Road funding could work the same way, but tending to fall more on the properties that benefit least from transit, since higher road use correlates to lower transit use.  Property taxes (inevitably passed through to renters) are the least volatile funding source around, and if you want your transit agency to work on real service improvement, instead of endless cycles of cuts, adds, and cuts, we'll have to find our way to a more stable funding solution.

13 Responses to shock-shifting to transit, but not back

  1. zefwagner May 20, 2012 at 4:58 pm #

    Hooray for property tax! It’s too bad so many citizens seem so opposed to ever raising the property tax, considering it is the least volatile, most universal (everybody pays), and most equitable (you are paying based on property ownership, so it is a better correlation to wealth than an income tax). I don’t quite know why schools should be funded through property taxes but transportation apparently shouldn’t. With transit it would probably be better to use a surcharge on frequent-transit-accessible property only. Otherwise low-density areas would demand their “fair share” of transit even more than they do now.

  2. Chris B May 20, 2012 at 7:03 pm #

    By “we” I assume you are writing for Americans? I know in Ottawa, transit is paid for 50/50 from property tax and fares. Some capital upgrades come from the Province, and the city does receive money from the fuel tax, but “transit” is not something tha receives a seperate funding allocation – the CIty determines what they want to spend and then allocates money (so this year, they are devoing $600 million to it total, which has to come from fares and taxes).
    Or do I have the Ontario model wrong? (see for example, OCTranspo in Ottawa’s 2010 funding where they get $25 million from gas tax and $163 million from the City –

  3. Carla Kenyon May 20, 2012 at 7:18 pm #

    Had a similar thought the other day when someone was discussing the Portland OR/Vancouver WA Columbia River Crossing bridge project. No one likes the tolling idea, and the states still need to come up with their end of the costs, but they are mainly looking towards gas tax. Interesting that we want to move towards transit but we keep funding it with vehicle driving (gas tax), so we’re basically taxing driving out of it’s own existence.
    (Which, don’t get me wrong, I’m fine with haha – just an interesting situation).

  4. Brent May 20, 2012 at 7:34 pm #

    Here in Toronto, most operating costs not covered from the farebox are funded through property taxes. That makes them subject to the annual political show around passing the overall municipal budget, especially in times (such as now) where the political flavour leans more toward reducing government services and lowering property taxes. The other challenge is that when ridership goes up, so does the subsidy, but if the assessment base doesn’t go up by the same amount, then property taxes have to go up as well. Every year at budget time, there are calls for more diverse funding sources that “grow with the economy”. So far noone has really noticed the situation south of the border, where “grow with the economy” can also mean negative growth.

  5. Matthew May 20, 2012 at 11:04 pm #

    The MBTA receives approximately $150 million a year in “assessments” which are charges levied on municipalities within the MBTA district. Probably paid for by property tax in most cases. It’s effectively like a fee for town-wide access to the system. It only constitutes 9% of revenues though.

  6. Paul K McGregor May 21, 2012 at 6:28 am #

    Keep in mind that the Canada Line opened at the end of 2009 and this certainly would have contributed to the expanding ridership throughout 2010 and into 2011.
    Translink also uses a combination of funding sources and does not rely on any one funding source but yet, they are still not able to what they want to do unless they have an increase in these funding sources.
    Another financing method that could be used is the assessment of transit impact fees. While this is useful for funding infrastructure improvements, it can also be used to establish new service. A residential development was started in southern Contra Costa County [Bay Area] and each residential unit was assessed a certain $ amount. This fund was used to start-up a new route and fund its operation for about a year. At the end of the funding, the agency would then decide whether to keep the route or let it go. This is the same principle used for CMAQ funds.

  7. Jeff Wegerson May 21, 2012 at 8:40 am #

    Economist Michael Hudson makes the argument for real estate taxing as well. He goes so far as to accuse financial institutions (along with real-estate) of working against property taxes absorbing the increasing values of urban real estate so they could capture those increases themselves through the interest payments attached to mortgaging those properties.

  8. Alai May 21, 2012 at 7:58 pm #

    There’s another funding model which hasn’t been mentioned, where the transit agency owns the land around its stations, and gets rental and other income from it. It’s my understanding that this is used in Asia to great success.
    I think this could be a useful model for the US, where many rail agencies own significant amounts of land which are currently used for free- or negligible cost parking. If they were built over as shopping/town center complexes, they could really boost transit agencies’ bottom lines, through rent collections, additional traffic from people traveling to the new destinations, and from additional local bus passengers who formerly drove to the station.
    The main obstacle is the idea that transit agencies are obligated to provide parking (and probably free at that) to anyone who wants it.

  9. david vartanoff May 22, 2012 at 8:56 am #

    One of the mistakes AC Transit (Oakland CA) made in the wake of Prop 13 (major reduction in real estate tax rates) was failing to re institute a % levy. In the intervening years housing values have soared such that if their levy had remained in force AC would be financially comfortable. The fixed rate levies they have instituted are regressive and insufficient as fuel/wages/health care costs spiked.

  10. Eric Goodman May 22, 2012 at 11:46 am #

    Check back through my previous posts and I’m sure you’ll find my supportive comments vis-a-vis property fees funding transit. Glad to see you’re thinking of that as well. I say fees not taxes because I think they should be based on a utility model that charges for the transit service level or access available at a site, not a % of property value.
    The utility model has potential to override public antipathy to property taxation. We use it to deliver water and gas molecules and electrons and to remove waste. Funding for these services is sometimes contentious, but I haven’t heard of electric companies in North America shutting down Sunday electricity because people aren’t shopping enough. Utilities are generally pretty straightforward about what the charges are and what you get for that money. A Transport Utility could levy a base charge every property pays for available access and then individual user fares cover the marginal cost of the mobility consumed.
    I think it would be interesting to experiment in a small system: if they charged 100% of a line’s cost as a property fee, but then rebate all revenue collected in fares, would that drive up ridership? It would be great to tell people complaining about the fee that the thing they need to do about it is “get more people to ride the bus.” Unlikely as it is to happen, a profit potential exists in that system and could entice people to support it, just like so many people happily buy lottery tickets even though few will ever win.
    No funding source is a panacea and relying on just one will always leave you vulnerable to whatever its’ weakness is. Ideally governments should tax everything, but at a very low rate so as to limit avoidance and offset strengths and weaknesses and economic cycles. I feel it’s also better to work backward from the need or desired service level to determine what the levy / fee should be, rather than deciding on a revenue stream and then figuring out how to use the resulting revenue.

  11. Helen May 24, 2012 at 5:42 pm #

    According to information that I saw on one of the public transit advocacy sites, most of the recent initiatives in the US to increase funding for transit were mill levy increases, and most of them passed.

  12. MB May 29, 2012 at 1:43 pm #

    Vancouver’s TransLink will receive over $109 million (Can) in 2012 from a levy on property tax assessments from the City of Vancouver alone. There are 21 municipalities in metro Vancouver, and the total TransLink income from property taxes is estimated to be almost $290 million. TL’s 2012 revenue from all taxes (fuel, parking, etc.) is estimated at a little over $700 million.
    There are, of course, other funding sources such as grants from senior governments, and these entities contribute to about a 2/3 share of the funding of major capital projects, such as the recently-approved Evergreen SkyTrain Line. However, TL can expect to receive $225 million from senior governments for its 2012 budget, and I assume most of it is a grant from the government of British Columbia.
    TransLink is an unusual organization in that it manages the regional road system as well as transit. In 2012 it will devote almost $850 million to transit, and a tad over $100 million to roads.
    Clearly, taxes of all kinds on the local economy support the majority of the day-to-day TransLink operations, even if the provincial and federal governments assume the majority of costs for the occasional large project.
    It has been said that the federal government returns eight cents for every dollar it takes out of the region. I’m not sure if I agree with that conseidering its contribution to healthcare, but the interpretation that the feds don’t contribute as much as they should rings true in the light of energy security (i.e. inflationary fossil fuel prices) and initiatives to lessen the effects of climate change.
    Paul McGregor above mentioned the high ridership of the Canada Line. It has been made abundantly clear in Metro Vancouver that the driverless (i.e. high-frequency) rapid transit network was one of the most productive economic stimulators ever imposed on the region.
    It’s now at the point where a two-tower, high-density residential complex sells out over 400 units in mere hours. The Gateway complex proposed adjacent to the Marine Drive Canada Line Station had over 11,000 applications for its registration list. The real estate agent said it’s no longer “location location location”, but “transit transit transit” that sells.
    Seems to be a new world forming out there.

  13. Nathanael June 9, 2012 at 9:51 am #

    This gets us into macroeconomic issues.
    When we have high unemployment and low wages… what we need is MONEY PRINTING.