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What's the Right Way to Fund Struggling Transit Systems?

They'll need a lot more federal help to stay afloat.

A bus at Rapid Central Station in Grand Rapids
Getting ready to board in Grand Rapids, Mich. (David Kidd/Governing)
Anthony Foxx, the former U.S. transportation secretary, could not have been more blunt about what COVID-19 has done to urban mass transit. We’re facing “the most urgent time, perhaps in the history of transit in America,” he said last year. Pandemic aid is running out, most state governments are unwilling to step in to shore up local transit systems and fare revenues have declined. As a result, Foxx said, “we’re seeing a cliff in front of us that can devastate transit agencies all across the country.”

The federal government will have to retool its support for local transit. But just how is that going to work? Transportation Secretary Pete Buttigieg says that “we have not yet landed at our new normal ... We’re not going back to 2019. But I also think today’s norm is not where all of this ends.”

Not only are we seeing transit struggle to climb out of the hole that COVID-19 dug. We’re in the midst of a fundamental debate about whether transit systems need to make a full transition from their traditional status as a quasi-utility, for which government aid supplemented riders’ fares, to a public service, where fares are much less important than a much broader collection of social and economic goals.

The feds supply 15 percent of local transit budgets, but most of that is for big capital projects. State and local governments each fund about a quarter of the expenses, with passenger fares and other system income making up the remainder. None of these pieces is holding up in the post-COVID-19 world. Local budgets are under stress and local systems can’t count on higher ridership to nibble away at the deficits. That’s why Foxx is right about the urgency of the problem. The mass transit strategies we knew before 2020 will simply never return. The feds are likely to be the only answer.

To be fair, transit managers are trying lots of new alternatives. Some system managers are installing Wi-Fi and phone-charging ports on their buses. Others are moving to streetcars that share the road with city traffic. But these steps don’t seem to be what people want.

The most satisfied urban transit riders get fast, frequent service. This could mean changing the schedules, because fewer riders are commuting to work at rush hour and more are hopping aboard at midday. It could also mean cutting routes with small ridership and increasing service on high-demand lines. Houston did that and boosted ridership on its bus lines, before COVID-19, without spending any more money.

Some communities are piloting reduced-fare transit ideas that would have been non-starters just a few years ago. Kansas City has made ridership free. Richmond, Va.; Olympia, Wash.; Boston; and Tucson have tested the idea. Los Angeles is debating it, and even New York City, with its sprawling network, has tested free fares on five bus lines.

Looking over the horizon, some planners are suggesting that public transit systems will need to “go beyond station-to-station and serve people door-to-door by embracing shared and on-demand mobility,” as one put it. In one Canadian town, the local government subsidized Uber rides. It may have worked too well. The town had to cap the number of rides people could take. But almost 70 percent of those who responded to a city survey said that they were satisfied — or even more than satisfied — with the option. Wilson, N.C., shifted its bus system to on-demand minivans. The system, known as “microtransit,” proved hugely popular.

Futurists are looking at autonomous vehicles, smart technology and even flying taxis, but we’re going to need to wait a while for those to arrive. In the short run, micromobility, microtransit and more fare-free transit plans offer intriguing options.

But underlying all this is a more important question: Are we heading for an era when mass transit is shifting from a public utility to a public service model? It would mean a shift from the traditional assumption that fares will cover a big chunk of the costs to a system that serves broader social needs, from serving the poor to leveraging economic development. One thing is clear: That would require a larger and more explicit public subsidy. And it would be to a great extent a federal subsidy.

It means a big shift in the whole concept of federal funding, moving beyond grants for capital construction and toward support for operations. And this, no doubt, is at the center of Secretary Buttigieg’s concerns as he scratches his head over the future of normal.

Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
Donald F. Kettl is professor emeritus and former dean of the University of Maryland School of Public Policy. He is the co-author with William D. Eggers of Bridgebuilders: How Government Can Transcend Boundaries to Solve Big Problems.
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