f~';:-.@\- - 0::: I ;:;",,0::: . a--;;"~~,, , to Transportation and Energy: Some Current Myths, Charles Lave, 1977, $2.50 from: Institute of Transportation Studies University of California, Irvine, CA 92717 Jay Baldwin at Co-Evolution Quarterly turned us on to this eye-opening paper wbich contributes a lot ofvaluable critical thinking to mass transit advocacy. Some excerpts follow. Lave brings a lot more of transportatipn reality into focus, arrd response to this paper is generating fresb tbinking. Great quandaries- change ill ICC regulations that would improve energy efficienc.y would also lower freight costs and lead to more centralizatiun. (It also would elimi,late raw materials freight subsidies that hamper material'Yecycling.) Our cities sprawl too much to support mass transit systems- but building them any/'Jow leads to greater density in the city's layout that is more favorable to mass transit. It also brings rampant real estate speculation and needless destT1lctiol1 ofgreat areas of existing buildings. So goes change. A big piece of the answer still lies in elimi1lating need for, ratber than improving, transportation. - TB . 1) Mytb 4: "Public transportation is more economical than cars" These findings are the most depressing of any discussed here, for thcy imply that transit's costs are so high as to make it unlikely that transit has any significant future. Transit is simply much more expensive than our intuitive estimates would indicate: on thc average, transit costs about two-thirds more per passenger-mile than the private automobile (including all capital and operating costs for the car) , but to be attractive to patrons it must charge them less than they would spend by car. That is, transit services are far more expensive to produce than car services, but they earn much less money. The end result has to be enormous deficits: in 1975 the total deficit for transit in the United States was $1.7 billion, and that deficit has been increasing at an average rate of 59 percent per year since 1968. Why are transit costs so high? Labor is-the major expense (80 percent of total costs) in transit systems; transit unions are in a monopoly position with regard to a vital service, and the normal discipline of the market is vitiated by the willingness of UMTA to provide the necessary subsidies. For example, bus drivers in San Francisco recently rejected, as too small, a pay package. that averaged $25,000 per year. These high labor costs lead to a high unit cost for providing the service. The marginal operating CQst of the major rail rranit systems (even treating capital costs' as sunk, and hence free) Which Ways Move? ~;:~~ &-?~\~j~~ l!§ tcW::~-'~ is about ten cents per passenger-mile; and this is true for both the traditional systems like New York and the modern systems like BART., (Since BART was designed to minimiz.e marginal operating cost through substitution of capital for labor, this is especially significant.) That is, their marginal costs are actually greater than those for the automobile. If we include capital costs as well, the comparison becomes even more surprisingfor example, the $12.00 average subsidy of a round trip on BART, which includes an operating subsidy of $2.62 and a capital subsidy of $9.44, assuming 7 percent opportunity cost of capital. Of course, these high unit operating costs imply"high defi· cits. In Boston only 25 percent of transit expenses are covered by fares- that is, there is a 75 percent subsidy. In California as'a whole the subsidy is abou t 60 percent. In New York, the esrimated deficit for 1976-77 was about $350 million. To understand the economics of public transportation, one must try to understand why we have $10,000/year taxpayers subsidizing $25,OQO/year bus drivers. It is difficult to see much future for transit in [he face of numbers like these. Furthermore, expansion will not, as some have predicted, make transit significantly more efficient. Economies of scale are possible in rail transit, but rail systems are feasible in only a few cities, and even when they are designed for minimum operating cost, as in San Francisco, their marginal costs are still too high to be covered by fares. Bus systems are the most flexible, the easiest to expand, and wo.uld be the best hope for increasing transit service in most cities, but there are no economics of scale in the provision of bus service. In summary, transit's current share of travel is only 2.5 percent, but transit requires a subsidy of $1.7 billion to accommodate even the tiny number of people it serves. The unit cost of providing transit services is already too high., and it cannot be reduced. This cost structure has grim implications for the future of transit. At best, taxpayers may agree to meet the increasing cost of maintaining the current level of service; expansion to accommodate a significant amount of urban travel seel}1s highly unlikely. •
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