Global Economy Briefs

Challenged transit funding creates the need for cost savings

January 09, 2023

A lot of recent media coverage has centered around the challenges to transit systems across the country and how potential service cuts might affect businesses and households in urban areas.  In a recent article, the WSJ discussed how pandemic ridership declines have continued in systems in New York City, Boston, and San Francisco.[i]  The article noted that depressed ridership levels combined with federal COVID relief running out have put significant financial pressure on many transit systems, potentially resulting in service cuts that might mostly affect low-income riders, workers that are unable to be remote, or segments of urban populations that are less well served by transit.

While these financial pressures, in part the result of post-pandemic ridership declines, are indeed accurate, there are also issues of operating and maintenance costs as well as capital cost overruns, as outlined in CED’s Solutions Brief on Infrastructure, that have been adversely affecting transit systems. 

Using New York City’s Metropolitan Transportation Authority (MTA) as an example, the Citizens Budget Commission identified $2.9 billion in annual cost savings due to one person train operation, maintenance productivity improvements, and healthcare cost reductions.[ii]  Unfortunately, many of these operating cost reductions have so far been unachievable because of the collective bargaining agreements between the agency and unions.  In addition, capital costs for maintenance and especially new system expansions have been ballooning.  For instance, the extension of subway service to the Upper East Side of Manhattan cost the MTA approximately $2.5 billion per mile of track, far greater than rail extensions in other parts of the world.[iii] 

Taking all these issues together, it is certainly true that depressed ridership has created a financial solvency crisis for the MTA and other transit agencies.  But comprehensive operating reform, renegotiated union agreements, and capital costs in line with other rail and transit operators, would significantly offset some of these cost burdens.  Businesses depend on workers for growth and productivity, and transit systems need to be able to provide adequate transportation services.  As noted in CED’s Solutions Brief on the Future of New York City, industry sectors associated with the recovery of the New York City economy directly rely on transit connections.  Overall, COVID has altered the financial posture of many systems, but it does not have to be the end of efficient public transportation.