Policy and Planning as Public Choice: Mass Transit in the United States

Public Transit Pays Large Dividends

By economic yardsticks, annual transit returns easily outpace costs, according to a newly published Federal study. 1997 costs were $26 Billion. During the 1990s transit returned:

$23 billion per year in affordable mobility for households that cannot afford a car or cannot drive due to age or disability;
$15 billion per year, increasing to $19.4 billion per year in 1999, in reduced congestion delays for rush-hour passengers and motorists;
$10 billion per year in reduced auto ownership costs for residents of livable neighborhoods;
Up to $12 billion per year in reduced auto emissions;
$2 billion savings per year in local human service agency budgets; and
2 % boost in property tax receipts from commercial real estate.

Transit services convey disparate benefits to the many constituencies who pay the bills. To uncover the value of these benefits, a bright thread is needed to navigate from budgets to services and from services to passengers and other taxpayers.

Research sponsored by the Federal Transit Administration introduced a public choice transit benefit matrix to meet this need (Lewis and Williams, Policy and Planning as Public Choice: Mass Transit in the United States, Ashgate, 1999). The examples in Table 1 illustrate how the matrix works.

Table 1. Public Choice Transit Benefit Matrix: Examples

	Public Choice Budget Transactions
Policy Goals	Market Exchanges	Club Exchanges	Spillover Exchanges
	Fare for a trip; transit passes for employees	Local taxes for bus stops; gas taxes for rapid transit	Federal grants to reduce auto travel, emissions
Affordable Mobility	With a reduced transit fare, an unemployed worker can afford a regionwide job search	Local agency pays for reduced fare to stimulate the labor market for workers and employers	More efficient labor markets reduce State unemployment costs
Location Efficiency	Households can afford more house if transit is convenient enough to replace a second car	Less property for parking means higher economic returns per square mile, i.e., higher property value	Fewer vehicle miles traveled (VMT) per capita per volume of economic activity increases efficiency for State or the U.S. economy
Congestion Management	A commuter boards rapid transit to avoid a crowded highway	Less traffic lets motorists achieve travel times similar to rapid transit	Less State highway construction needed to "solve" congestion
Source: David Lewis and Fred Laurence Williams, Policy and Planning as Public Choice: Mass Transit in the United States,(Aldershot: Ashgate, 1999). Examples.

The rows in Table 1 are three transit policy goals which taxpayers have perennially financed for the last quarter century. These goals correspond to three market niches where circumstances persistently hamper the normal advantages of private autos:

Affordable Mobility for people who cannot afford a car or cannot drive;
Location Efficiency for dense residential and commercial centers; and
Congestion Management in severely congested commuter corridors.

The columns in Table 1 represent three linked deals that decision-makers transact in every transit budget:

The exchange of anticipated passenger fares for "Market" benefits;
The exchange of funds from local jurisdictions for "Club" benefits; and
The exchange of State and Federal grants for "Spillover" benefits.

Table 2 illustrates a use of the Transit Benefit Matrix with data on the value of U.S. transit benefits in 1990 - 1993. The measurement approach is in parentheses. A few cells overlap. Total transit costs in 1990 were approximately $17 Billion.

Table 2. Public Choice Transit Benefit Matrix, Suggested National Measures

	Public Choice Budget Transactions (1990 – 1993 Benefits in Billions)
Policy Goals	Market Exchanges	Club Exchanges	Spillover Exchanges
Affordable Mobility	$23 Consumer Surplus for Low Income Households (Econometric Analysis)	$2 Reduced Local Social Service Budgets (Budget Audits)	$0.3 - $5 Harmful Emissions Avoided by Reduced VMT (Survey Data; Census)
Location Efficiency	$9.6 Avoided Auto Ownership Costs for above poverty Households (Survey Data; Census)	2 % Commercial Property Value Gain Per 1,000 feet Less to Transit Station (Hedonic Analysis)	$0.3 - $5 Harmful Emissions Avoided by Reduced VMT (Survey Data; Census)
Congestion Management	$4.6 Auto Fuel, Parking, Passenger Time Savings (Transit Models)	$18 Value of Travel Time Savings for Motorists in the Congested Corridor (Transit Models)	$0.1 - $2.2 Harmful Emissions Avoided by Reduced VMT (Survey Data; Census)
Source: David Lewis and Fred Laurence Williams, Policy and Planning as Public Choice: Mass Transit in the United States,(Aldershot: Ashgate, 1999). Selected Measures.

Fine-tuned for local conditions, the public choice transit benefit matrix can be used for any transit system or project. Transit planners in Austin, Texas, for example, are currently applying this matrix to several potential route alignments. The Lewis and Williams book explains in detail the concepts and methodology. Continued empirical research is needed on additional club and spillover benefits such as highway construction savings, labor market efficiencies, and agglomeration economies.

Contact: Fred Williams (202) 366-1696 [fred.williams@fta.dot.gov]