Thursday, April 28, 2011

100% operational subsidy as a path to growth and financial independence

The gas tax pays for highways—not cars—so why does the bulk of fare revenue for bus and train operations get fed into running the buses and trains themselves rather than the roads and guideways they run on and the stations they serve?

I think it would make a lot of sense to increase the direct subsidy for mass transportation so that all of the above-the-road and above-the-rail costs are covered by the government—at least for a period of time. This would allow the fare revenue to be devoted to maintenance and expansion of the system.

If this sort of arrangement had been made with Amtrak, they would have been able to spend tens of billions of dollars on making their system better over the past 40 years. Of course, the creation of Amtrak was a weird super-merger of 26 passenger systems, so perhaps only 30 of those last 40 years could have had a cohesive vision. (Unfortunately, political bickering has made it hard to understand what Amtrak should be even today, though I think the railroad's recent leadership has really helped turn things around.)

Anyway, since the freight railroads have a fairly antagonistic relationship with passenger services, the fare revenues could have been put into incrementally building a dedicated system of high-speed passenger corridors. Amtrak as it currently exists requires about $2 billion in annual subsidies. Most studies I've seen of true high-speed corridors just for the Twin Cities to Chicago route expect that the service would generate more than $1 billion in excess revenue each year [Edit: I'm going to research that a bit more—I was going by a faded memory when I wrote it, and I may have been thinking of revenue rather than surplus], so Amtrak would only need one, two, or maybe three major high-speed trunk lines to generate enough revenue to cover both the above-the-rail and below-the-wheel costs for their entire system. I'm pretty confident that Amtrak could have become financially independent sometime between 1990 and 2000 if this model had been used.

Regional sales taxes for local transit systems have kind of used this idea. In the Twin Cities, the 0.25% sales tax that funds the Counties Transit Improvement Board generates roughly the same amount of revenue each year as fares do on the area bus and rail lines. I'm not sure if it will ever be possible to make our local transit system profitable—at least not without massive transit-oriented development efforts—but I still think that having improvements tied closely to ridership would lead to good things.

Hmm. Perhaps CTIB should actually get into the housing game... Thomas Lowry was a housing developer, after all...

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