SUBSIDIZATION OF TRANSIT OPERATING COSTS: A CASE STUDY OF METRO

AN ATTEMPT BY TRANSIT PROPERTIES TO FINANCIALLY SURVIVE HAS USUALLY RESULTED IN THEIR INCREASING FARE LEVELS FOLLOWED BY A SUBSEQUENT DECLINE IN PATRONAGE. THIS REPORT DISCUSSES THE REASONS WHY PUBLIC ASSISTANCE TO URBAN TRANSIT PROPERTIES IS OFTEN VERY NECESSARY. A FINANCIAL ANALYSIS IS MADE OF THE WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY'S (WMATA OR METRO) RAIL SYSTEM PRESENTLY UNDER CONSTRUCTION. BY DEFINING RAIL NET REVENUE AS GROSS RAIL REVENUE MINUS TOTAL RAIL COSTS (INCLUDING DEPRECIATION ALLOWANCES AND DEBT RETIREMENT), IT IS CALCULATED THAT A RAIL SYSTEM OPERATING DEFICIT OF OVER $5 MILLION IS LIKELY TO OCCUR IN 1990. WAYS TO RELIEVE DEFICITS ARE IDENTIFIED AS DEFICIT SUBSIDIES, INPUT (COST) SUBSIDIES OUTPUT SUBSIDIES AND FARE SUBSIDIES. A FORMULA IS DEVISED TO SEE HOW THE FINANCING OF SUCH A DEFICIT MIGHT BE ALLOCATED AMOUNT THE 3 MAJOR POLITICAL JURISDICTIONS IN THE AREA: THE DISTRICT OF COLUMBIA, VIRGINIA AND MARYLAND. THE PROPOSED FORMULA IS BASED ON SERVICE, RIDERSHIP AND POPULATION CHARACTERISTICS OF EACH OF POLITICAL PROBLEMS AND JURISDICTIONAL CONFLICTS ARE ALLUDED TO BUT NOT DISCUSSED IN DETAIL. IN DISCUSSION OF TRANSIT FINANCING AND PRICING, ALLOCATION OF PUBLIC TRANSIT COSTS AMONG NON-USERS AS WELL AS USERS OF THE SERVICE IS DEBATED. THE AUTHOR SEES A STRONG ARGUMENT IN FAVOR OF ELICITING RELATIVELY MORE SUPPORT FROM NON-USERS THAN IS PRESENTLY THE NORM. IN TERMS OF JUSTIFICATION FOR THIS IT IS NOTED THAT THE EXTERNAL ECONOMY IS STIMULATED BY MASS TRANSIT TO THE EXTENT THAT THERE IS INCREASED BUSINESS IN THE CENTRAL CITY AND MORE EMPLOYMENT OPPORTUNITY.

  • Supplemental Notes:
    • UMTA-DC11-0003-7312
  • Corporate Authors:

    Consortium of Universities

    Urban Transportation Center, 1717 Massachusetts Avenue, NW
    Washington, DC  USA  20036
  • Publication Date: 1973-5

Media Info

  • Pagination: 43 p.

Subject/Index Terms

Filing Info

  • Accession Number: 00201076
  • Record Type: Publication
  • Source Agency: Urban Mass Transportation Administration
  • Report/Paper Numbers: Final Rept
  • Files: TRIS, USDOT
  • Created Date: Jul 22 1974 12:00AM