TRANSIT PERFORMANCE BRIEF
Transit Performance Briefs: Description

Transit Performance Briefs: Description (20041219)

Transit Performance Brief: Chicago Transit Authority: Annual Spending up $208 Million (20041219)
Transit Performance Brief: Pittsburgh: Port Authority Transit: Annual Spending up $81 Million (20050104)
Transit Performance Brief: Philadelphia: SEPTA: Annual Spending up $165 Million (20041219)

COMMENTARY

Transit agencies around the United States are experiencing budget difficulties. The proximate cause of the current financial crisis is that costs have been insufficiently contained.

It is difficult to find an industry in which costs have increased more rapidly than in transit. From 1970 to 2002, transit costs per passenger mile increased more than 180 percent, after adjustment for inflation. By comparison, the medical care consumer price index increased less than one-half that of transit.

Transit's cost performance in the United States is particularly stark in comparison with international transit developments and trends in other transportation industries.

In a number of world urban areas, governments have required transit agencies to implement cost containing structures that have reduced costs considerably. The most typical strategy is competitive contracting (competitive tendering), in which the transit agency continues to administer the system, but purchases service for a specified period of time from private providers. This strategy has reduced London bus costs approximately 50 percent since 1985 and has reduced Stockholm bus, metro (subway) and commuter rail costs approximately 20 percent since the early 1990s (add data inflation adjusted). Copenhagen, Adelaide, Perth (Australia) and other urban areas have also converted to competitive contracting.

Federal regulation and strong labor and rail building lobbies have generally kept more cost effective strategies from being implemented in the United States. There are, however, exceptions. For example, approximately 40 percent of bus services in San Diego have been competitively contracted. Since 1983, costs per passenger have dropped more than 40 percent (inflation adjusted).

Competition has also been applied in other US transportation industries. Both the airline industry and intercity bus industries were deregulated more than two decades ago. Costs per passenger mile have dropped steeply, in contrast to the cost escalation that has occurred in transit.

This series reviews cost performance of US transit agencies, with comparisons to results that have been obtained where competition has been applied, both in transit and other transportation industries.

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