Urban Mass Transit is not a National Problem

Urban Mass Transit is not a National Problem. By Bob Poole, Director of Transportation Studies, Reason Foundation

At a time of unprecedented federal deficits, the idea of expanding the federal government’s spending into what is basically a local issue requires a very high level of justification. The others who have posted on this blog, arguing in favor of federal funding for transit operating costs, have failed to meet that standard.

Merely desiring federal money and having something nice to spend it on is hardly a justification. Not when, according to the Government Accountability Office, “the federal government’s financial condition and fiscal outlook are worse than many may understand. Specifically, the federal budget is on an unsustainable path—raising questions about whether people should assume federal funds will be available to help solve the nation’s current infrastructure challenges.” (GAO-08-763T, May 8, 2008)

Recently-retired Comptroller General David Walker devoted much of his energy in recent years to calling on the nation to rethink the role of the federal government. A sensible rethinking should ask which functions are truly national in scope, such that they serve all Americans and can best be carried out at a national scale. National defense is one such function. The Interstate highway system is another.

The federal government got into surface transportation funding in the 1950s on an interstate-commerce rationale. And indeed, it would have been difficult to build the nationwide Interstate system without the federal funding mechanism of highway user taxes that redistributed funds from high-traffic states to lower-traffic states for that specific purpose. But urban mass transit is a local and sometimes regional function. Its beneficiaries are primarily those who use it and secondarily those in that urban area who receive secondary benefits (such as slightly less traffic congestion and miniscule improvements in air quality). There are no national benefits.

And it’s not as if no other means of transit funding are available. Local transportation sales taxes exist in a growing number of urban areas and are a robust funding mechanism. All of California’s urban counties have such “self-help” taxes, providing a larger share of their budgets than federal transit aid. There is considerable potential in real-estate value capture that very few transit agencies have even attempted to exploit.

There are also perverse incentive effects when cities and their transit agencies can get “free” federal money. In a growing number of cases, when faced with the choice of a very costly light rail project or a far more affordable bus rapid transit (BRT) project, being able to get a large fraction of the cost as a gift from Washington biases the choice toward the more costly alternative. If the cost of the project had to be raised locally, there would be stronger incentives for cost-effectiveness to play a major role in such choices.

Finally, there is the question of whose money it is. Currently, most federal transit funding comes from the transit account of the Highway Trust Fund. In other words, the source of that funding is motorists and trucking companies, paying what are supposed to be user taxes in order to have a high-quality highway system to use. Ever since the 1964 Urban Mass Transit Act, the fraction of highway user taxes that can be diverted to non-highway uses has been steadily increased. Yet study after study in recent years has documented the poor condition of our highways and bridges, and the horrible congestion plaguing urban roadways. Taking an even bigger slice of the pie for urban transit would condemn the vast majority of Americans—for whom cars and trucks are their only viable alternative—to ever-worsening highway hell.