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Regulation & Finance

Unit 7: Forecasting and Encouraging Ridership

Materials developed by K. Watkins, J. LaMondia and C. Brakewood

Outline

• Review transit regulations.– What are the limitations on growth?

• Consider underlying funding structures.– How do we organize growth?

• Options for funding sources.– Who can fund growth?

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…or Ensuring Future Transit

Increasing ridership demandversus

Decreasing funding sources

How can we respond?

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Option 1: Increase Fares

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Option 2: Reduce Service

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Option 3: Get Innovative

• In order to address the future of transit service, we need to understand – Regulation– Funding Structures– Funding Sources

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TRANSIT REGULATIONS

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The Need for Government Control

• Socially important but financially non-remunerative service

• Support for lightly used suburban areas

• Avoidance of profit-gouging monopolies

• Minimal duplicative, uncoordinated services

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Public Takeovers

• Most transit agencies were private, but faced many challenges– Public need ≠ capital gains– Opposition from auto-industry– Difficult to enforce ordinances

• Public consolidation of agencies

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Types of Ownership Today

• Private Companies– Typically in small communities– Receive indirect or direct financial assistance from

government– Often hired as contractors to operate systems

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Types of Ownership Today

• City Area Public Agencies– Typically in small-medium sized communities– Receive direct government funds– Several forms:• Quasi-private company• Utility division• Municipal agency

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Types of Ownership Today

• Regional Transit Agencies– Typically in large mega-regions– Serve inter-city travel routes– Several forms:• County-owned transit agency• Regional transit authority• Regional transit district• State-owned transit agency

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Integrating Transit

• Many agencies remained uncoordinated, fragmented until late 1960s

• Major effort within public ownership is to coordinate systems

• Failure to do so, loss of revenue and limited efficiency

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Role of Transit Regulations

• Like all transport systems, important to have:– Coordination– Safety– Reliability– Reasonable fares

• Some modes are highly regulated

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Safety Regulations

• Ensure safety of the traveling public and the other potentially affected parties

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Safety Regulations Impact...

• Structural elements and design of transit infrastructure

• Vehicle design and performance

• Frequency and scope of vehicle maintenance

• Operational practices

• Training of drivers and personnel

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Economic Regulations

• Ensure reliability and permanence of services

• Protect public from being overcharged

• Prevent losses to operators due to duplication of services

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Economic Regulations Impact...

• Franchise growth– Minimal control– System control

• Fare charging– Floors on fares– Maximum fare limits– Full control

• Quantity and quality of service– Limits on frequency, reliability, speed, comfort, etc.

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Social Regulations

• Achieve or test certain technical/ operational innovations

• Provide certain levels of mobility and special services for population groups/ geographic areas/ types of trips/ etc.

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Social Regulations Impact...

• Develop, test, demonstrate new technology

• Maximum impacts– Noise & air pollution– Evacuation procedures– Fire protection

• Specialty programs– Reduced fares for students/ elderly

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Deregulation?

Pro Deregulation• Regulations are inefficient

and wasteful

• Economic regulations affect economy

• Takes too much red-tape for development

Anti Deregulation• Unfair allocation of costs

• Social needs of underprivileged travelers

• Support allows for economic vitality

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TRANSIT FUNDING STRUCTURES

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Funding of Different Modes

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Allocation Concerns

• Passenger vs. Freight Transport

• Intercity vs. Urban Transport

• Operating vs. Investment Costs

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Revenue Structures

• Revenue from Users– Passes/ admission– Used on operations

• General Government Budget Funds– General budget, typically from taxes– Most flexibility in application

• Special Government Funds– Earmarked funds, typically federal– Very specific application

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Ratio of Revenue to Expenditures by Mode

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Sources of Transit Funds

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Percentage of Transit Funds

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Operating and Capital Funds

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% of States’ Transport Budget for Transit

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How Does Our State Compare?

http://gis.rita.dot.gov/StateFacts/

• Economy & Finance– Transportation Finance– Gasoline Tax Rates

• Passenger Travel– Public Transit – Urban Transit Ridership

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TRANSIT FUNDING SOURCES

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Types of Taxes

• Transportation user taxes– Fuel/motor vehicle taxes, parking taxes, tolls

• Economic benefit-related taxes– Employment taxes, real estate taxes

• Broad-based taxes– Sales taxes, income taxes, property taxes

• Other sources

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Financing Tools

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Financing Tools

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Grant Programs

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Local Sources

Source: Transportation for America

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Local Sources

Source: Transportation for America

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Public-Private Partnerships

• A contractual agreements between a public agency and a private partner, where the partner participates beyond simple procurement.

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Public-Private Partnerships

Pro• Risk Transfers

• Access to Private Capital

• On-time Completion

• Expertise and Technical Capacity

Con• High Cost of Private Capital

• Experience Differential

• Loss of Public Control

• Labor Loss

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Conclusions

• Funding is a critical issue for agencies

• Safety, economic, and social regulation ensure that transit agencies run safe, sustainable, and fair systems.

• Transit funds come from fares, general governmental budgets and special governmental funds.

• Public-private partnerships are seen as a new way to fund transit in a budget restricted time.

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Reference

Materials in this lecture were taken from:• Vukan Vuchic, “Urban Transit Operations,

Planning and Economics” (2005)• Transportation For America, “Thinking

Outside the Farebox”, http://t4america.org/wp-content/uploads/2012/08/T4-Financing-Transit-Guidebook.pdf.