Monday, March 28, 2011

Seeking truth about possible transit cuts

Minnesota House Rep. Mike Beard (R-Shakopee) has proposed reshuffling funds for Twin Cities transit services, taking $69 million from the Counties Transit Improvement Board (the CTIB, funded by a 0.25% metro-area sales tax) for the next two-year biennium and forcing it to be used for existing transit instead of for future lines. The Metropolitan Council has said that this would effectively end up being a cost of $120 million over the biennium. They laid out two scenarios about how such a cut would affect transit in the Twin Cities:
  1. If transit systems must recover the funds through fare increases, the cost of a ride could go up by $4.00, resulting in fares of $7.00 in some cases, and losing 60% of ridership (a loss of 40 to 48 million riders annually, or around 150,000 per day).
  2. Alternately (and more likely), 45% of regular-route services would be cut, 550 people would be fired, fares would rise $0.25, and 22 million rides per year would be lost (around 70,000 per day).
I'm frustrated that I'm getting different sets of numbers from each side. I am disinclined to believe the numbers from Rep. Beard, particularly since I agree with the assessment that this is a raid on funds that the state has no right to take away—an allegation he denies. Yes, Mr. Beard, the CTIB is a creation of the state legislature, but that's simply because city and county governments in Minnesota are not allowed to enact local sales taxes without the legislature's approval. It's also a regional entity covering more than one county. Of course the state had its hand in the CTIB's creation—it's a requirement under the circumstances! By no means does that make it appropriate for the state to take away the funding, even if it has supposedly been backfilled with $51 million from the general fund (which comes with restrictions preventing them from being used on new rail transit projects).

It seems at first blush that the Metropolitan Council's response has been alarmist, but how does that hold up to further scrutiny? Conveniently, the revenues for metro-area transit systems add up to just over $100 million per year, so an annual extra cost of $35 million would require a fare increase of at least 35%, and an annual extra cost of $60 million would require at least a 60% fare increase. That doesn't factor in losses in ridership due to the increased cost—apparently there's a rule of thumb in the industry that a 10% increase in fares translates to 3% fewer riders, meaning that a 10% increase only translates to 6 or 7% more revenue. Of course, the amount of revenue you can generate is a curve—at some point, increasing fare costs drive ridership down so much that revenue begins to fall.

The Twin Cities transit system might be able to absorb a $35 million hit through fare increases alone, though the increases would need to be very large—perhaps more than 55%. Using the really dumb model of a 3% loss for every 10% increase in fare cost, it would not be possible to cover a $60 million gap, no matter what you charged for the fare. My curve started declining when the fare hit 210% of current costs (current fare plus 110%), and peaked at about $41 million in additional revenue.

An actual economist could give you better numbers, but this exercise lends a fair amount of credence to the idea of a $4 fare increase. It could be that the Met Council's models also maxed out before they could find $60 million in additional revenue, and they just picked a big, round number.

It would clearly be insane for the Metropolitan Council to attempt to retain the same level of service when faced with a $60 million shortfall, so let's take a closer look at their alternative scenario: 22 million riders lost. What might that mean? Well, as I said, it seems to translate into roughly 70,000 riders per day, or more than twice the daily ridership on the Hiawatha Line. If those riders each got a car, it would require a decently-sized highway—at least two lanes in each direction. Many riders would have little choice but to buy a new car—if 30,000 people bought cars, that would have serious consequences. Clearly, many people who ride the bus can't afford cars in the first place, so the personal outcomes would be dire, and it would add up to some huge amounts of money in the aggregate.

Even the American Automobile Association says it costs $9,519 per year to own a car. 30,000 new cars at $9,500 a pop? How does $286 million per year sound? Some of that money would stay in the local economy from cars being locally serviced, but a lot of it would flow away to pay for cars, parts, fuel, insurance, and corporate profits on the cost of service in general.

Okay, that's likely an overestimate on how much it would cost, but a cut of $60 million per year would clearly lead to an economic hit that is significantly larger than $60 million. Many people won't buy cars, but tens to hundreds of millions of dollars will get redirected. Some riders own cars already and will simply start paying more for fuel, maintenance, and parking. Some riders will shift to carpools, while others will bike or walk. Some people will move closer to work, probably paying more money in the process. Others will move away from the Twin Cities entirely, reducing the tax base. Some will lose their jobs and become dependent on their state and local governments for support. People who are unable to drive may have to turn to Metro Mobility or other dial-a-ride services, which are also very expensive and heavily subsidized.

The tremendous cost of automotive "rolling stock" is a major factor that usually gets left out of conversations about public transit. When investments can be made into transit, cycling, and walking infrastructure to allow more people to live car-free, it leads to more money in the pocketbook, which collectively provides a significant economic boost to a region.

You scarcely need to get rid of 100 cars to add up to $1 million per year. That's well within the scope of what can be done in a neighborhood or small town through proper planning. Saving $9,519 per year for 10 or 20 years also adds up to a huge amount that can be invested in better housing or better education. This is why it's good to design walkable, bikeable environments everywhere, and build for transit whenever possible.

Instead of cutting funding to transit, we should be funding it more. The Twin Cities is under-served by Metro Transit and other providers, and we have more people here who would get rid of their cars if service was improved, which would have a big impact on pocketbooks around the region and could make the economy significantly more robust. We remain behind other comparable regions when it comes to building high-quality bus and rail transitways, and we need to catch up. Cutting funding will only work to slow us down further.

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