Mass Transit Systems Have a Hard Time Paying the Bills

The good news, ridership is up; the bad news, ridership is up.

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Commuters crowd onto a subway car at Grand Central Terminal during the evening rush hour.

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Strong-arming recalcitrant aldermen, Chicago Mayor Richard Daley recently framed the debate this way: Either support a property tax increase to fund the city's cash-strapped transportation authority or "stand up and say, 'I want the CTA to bypass my ward.'" Minutes later, the 40 percent tax increase on city property buyers passed overwhelmingly, 41 to 6. If only it were that easy in every burg where the aging rail lines keep rotting, the fares keep rising, and the trains have to keep rolling.

With gas at $4 per gallon and highway congestion soaring, ridership on the nation's subways and buses has jumped dramatically. Between 1995 and 2006, use of public transportation increased by 30 percent, a rate far outstripping both population growth and increased highway usage. Last year, that meant Americans took some 10.3 billion trips on mass transit. And therein lies the problem. "There's a transportation finance crisis writ large across the country," says Robert Puentes, a fellow at the Brookings Institution's metropolitan policy program.

Because mass transit systems are so expensive to operate, they rely heavily on subsidies from federal, state, and local coffers. But the flow of money has not kept pace with the ridership growth. And when demand is coupled with capital costs or deferred maintenance and bonds coming due, many transit systems now find themselves in a financial bind that promises to only get worse.

In the red. The transit agency in Boston, for instance, is now some $5 billion in the red. The New York Transit Authority will face an estimated $700 million deficit this year, which is projected to jump to a $1.1 billion shortfall in 2009 and a $2.07 billion gap by 2011. "The state wasn't kicking in money for capital needs, so we were taking out bonds," says William Henderson, executive director of the Permanent Citizens Advisory Committee to the Metropolitan Transit Authority. "Now, not only are you having to pay for the 40 percent of cost of operations that you're not covering through the fare box, you're also paying for more and more debt service."

Like the nation's highways, transit systems are not federal assets; they are owned and operated by a patchwork of local and state partnerships. While this means that each network has flexibility in the way it secures funding, it also makes finding money a constant struggle between often competing entities. In Chicago, one month after the mayor cajoled aldermen into supporting his tax plan, state legislators and Illinois's governor were unable to agree on a CTA funding package, forcing cuts of $200 million from the capital-improvements budget. In Chicago, the need for repairs is particularly acute. Miles of train track need repair, and some dilapidated bus garages are so old they were built for horses.

Substantially increasing the fares isn't a practical option in most cases, though record hikes have recently been levied in Washington, D.C., and New York, while the price of a rail ticket in San Francisco has jumped 26 percent in the past five years. A survey in 2001 found that 43 percent of the country's transit riders live in households where the annual income is less than $20,000, and nearly the same percentage of riders come from households without cars. "The hard part of transit funding is finding that sweet spot where you're not punishing the people who need it most, but you're getting enough out of riders to make the whole package work," says Bob Dunphy, senior resident fellow for transportation and infrastructure at the Urban Land Institute.

Federal purse strings. Part of the squeeze stems from the failure of federal funding to keep pace with the relative explosion in the number of transit systems under construction. Even as more cities build or expand their systems and ridership hits a 50-year high, the amount of federal funding has remained constant. And now, the federal transportation trust fund, paid for largely through an 18.4-cent-per-gallon gas tax, is scheduled to run out of money next year. The federal fund will have a $3 billion surplus this year, which will become a $3.9 billion deficit by 2009. When Congress proposed raising the gas tax to close the expected gap, the White House called for cuts in spending. The tax has not been raised since 1993.