Philadelphia: SEPTA:
Annual Operating Costs up $165 Million

Commentary Below

Operating Costs: 2002 $748,800,000  
Operating Cost per Passenger Boarding: 2002 $2.39  
Operating Cost per Passenger Boarding: 1983 $1.86 1983 Cost per Unlinked Passenger Trip, Adjusted to Account for Inflation to 2002
Excess Cost Increase per Passenger Boarding $0.53 Excess cost increase over inflation
Excess Cost Increase per Passenger Boarding 28.3% Increase means lostt in productivity.
Excess Annual Increase in Costs $165,000,000 2002 savings if transit agency had kept cost increases within inflation.
Scenarios: If Costs Had Been Contained Within Excess 2002 Spending  
1 - Inflation Rate (1983-2002) $165,000,000 2002 savings if transit agency had kept cost increases within inflation.
Market Indicators    
2 - San Diego Transit Bus System Costs (1983-2002) $432,500,000 2002 savings if transit agency had controlled costs as well as the San Diego Transit Bus System.
3 - US Domestic Airline Costs (1983-2002) $428,300,000 2002 savings if transit agency had controlled costs as well as the airline industry (revenue per passenger mile).
4 - US Intercity Bus Industry Costs (1983-2001) $244,600,000 2002 savings if transit agency had controlled costs as well as the inter-city bus industry (revenue per passenger mile).
Source: Federal Transit Administration National Transit Database  
2002 operating costs are likely understated in comparison to 1983 costs, due to a federal transit accounting change that allows some maintenance costs to be counted as capital costs.
Capital Costs not included (capital costs are included for airlines and intercity bus.
2002 intercity bus cost information not available.    
1983 is first year of present FTA National Transit Database reporting format.  


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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