National Transit Union Proposes a Smart Fuel Subsidy

southern_nj_rail.jpg

Tired of hearing about gas tax holidays, bridge toll suspensions, and rebates for drivers? Here’s a policy proposal that will actually improve commutes, not just encourage trips by car: subsidizing fuel for transit systems.

As the Wall Street Journal reported earlier this week, rising diesel prices are hitting transit agencies hard (preview only), leading to fare hikes and service cuts even as ridership balloons. Now, the Amalgamated Transit Union, which represents transit workers in the U.S. and Canada, is calling on Congress to help agencies purchase fuel. The ATU made their case in a statement released this Wednesday: 

Americans took 2.6 billion trips on public transportation in the first three months of 2008, nearly 85 million more trips than last year for the same time period.

Yet, ironically, while high gas prices are encouraging more people to ride transit, rising diesel prices are also causing mass transit systems nationwide to raise fares, cut service, lay off staff, and delay capital spending. Like other consumers, the agencies are also paying more for fuel — 44% more this year than last. "So, at a time when demand for buses and trains is at one of its highest points in history, we have transit agencies cutting back. This makes no sense," said ATU International President Warren S. George. "Transit needs to be part of the solution — not the victim — of high gas prices."

This is one fuel subsidy that makes sense from an emissions perspective. According to the American Public Transit Association, the average transit user consumes half as much oil as the average car commuter.

Photo of NJTransit’s Southern New Jersey Light Rail: DMJM Harris

  • Larry Littlefield

    With so few people riding transit, and the need to run at least some service on a schedule to maintain mobility, the irony is that buses haven’t used that much less fuel per passenger mile that cars.

    But if you put some passengers in all those empty seats…

    Of course, most private motor vehicles have empty seats as well.

  • I don’t get it. Speaking from a purely economic perspective, we already underwrite the fuel costs for transit. No transit system in America has 100% farebox recovery, so as fuel prices, the taxpayer’s share of the operation naturally increases. This serves as a de facto subsidy for fuel. I agree that we need to increase the subsidy for transit, but why single it out as a fuel subsidy?

  • Mark Walker

    Hey, whatever works.

  • I had heard once that European countries tax fuel based on efficiency. This is the reason that so many more Europeans use diesel fuel. The price difference is such that regular petrol is more expensive than diesel, as regular petrol is considerably less efficient at producing energy. Is this true?

  • Diesel (cetane) and petrol (octane) have the same energy density per unit weight, but diesel fuel has higher energy density per unit volume.

  • Matt Kime

    its hypocritical to call for a subsidy of fuel only where mass transit is concerned while demonizing politicians for trying to supply a gas tax holiday to drivers.

    mass transit should be every bit as concerned with conserving gas as individual drivers.

  • Larry Littlefield

    (mass transit should be every bit as concerned with conserving gas as individual drivers.)

    As everyone here would probably agree, in the short run lifestyle is more likely to lead to conservation than technology.

    Fill those seats by carpooling or using transit, and fuel use per passenger goes down.

    And here’s where the bike comes in. In most of the U.S. density is too low to walk to transit on both ends. But one could bike to transit on the residential end.

  • Davis

    Matt Kime,

    It’s not hypocritical at all.

    Mass transit is a more efficient use of fuel.

    We should do whatever we can to encourage the use of mass transit and keep it affordable and competitive.

  • I think the ATU’s call for a special transit fuel subsidy is extremely poor p.r.

    The appeal completely undermines transit’s claim to be a fuel and energy saver. After all, if transit does have low per-passenger fuel use, it shouldn’t be that sensitive to rising fuel prices. And what about the increased revenue from the gains in ridership?

    From a back-of-the-envelope calculation, I figure that the revenue from a 25% gain in ridership should offset a 50% increase in fuel price. (I assumed that fuel was 20% of expenses until recently and that the farebox covers 40% of all expenses — I could be way off on both.) A 25% increase in ridership is a tall order, but transit systems should concentrate on making it happen instead of trying to cut a deal that makes them look like another special interest.

  • rlb

    CK
    An 85 million increase to 2.6 billion is only a three percent increase in ridership. That’s pretty slight compared to the roughly 33% increase in fuel prices from this time last year. That’s an order of magnitude difference and a pretty stiff drink for transit agencies’ notorious underfundedness.
    Given the climate, I think it’s a smart move for TA’s to clamor for fuel subsidies. Seemingly daily news stories are saying that people are switching over, and a decrease in service won’t help that trend.

  • Jacob

    This doesn’t undermine transit’s efficiency claim at all. The need for additional subsidy is partly due to the constant problem of farebox recoveries ratios below 1. Even with your calculations, each additional passenger only pays 40% of the cost of the new trip. Therefore additional passengers require additional subsidies, and I believe most system are not subsidized on a per/passenger basis. Can anyone confirm?

    Add rising fuel costs to the equation and the farebox recovery ratio declines even further. It is altogether reasonable for transit to ask for additional subsidy to offset additional operating costs. This subsidy will maintain low transit fares in the face of rising gas prices.

    Finally, Your farebox recovery ratio of 40% is only valid for about 9 cities in the US, most of which are predominantly rail systems, less affected by rising fuel costs. I also think that the bus heavy systems, which operate at 15-20% farebox recovery spend much more than 20% of their budget on fuel. Can anyone confirm this?

    http://findarticles.com/p/articles/mi_m0BQQ/is_7_44/ai_n6131811

  • Niccolo Machiavelli

    Greater capacity utilization is a great way to pay for mass transit. Land use decisions and other market considerations (high fuel prices, toll increases, fare policy) that affect peoples choices are great ways to do that. What is being protected by the thrust of this legislation is fares and the political will to hold fares down. Mass transit is less sensitive to fuel market fluctuations on both slopes of the price cycle. That is one of its economic appeals, the opposite is true with the capital cycle however. It is easier to sell your SUV and buy a Smart Car than it is to electrify a diesel rail or bus system. The capital life cycle is much longer for mass transit, another benefit.

    Mass transit operating costs, while less sensitive to the market cycle are going up very rapidly not just for diesel but other factors as well, including Larry Littlefield’s famous position on pension costs (people are living longer and improvements have been). Part of that cost increase is attributable to drivers switching to mass transit, one would think a good thing.

    Lowering fares would increase capacity utilization but still would increase costs. This legislation is entirely proper and will only help to protect fares, especially in New York. You can pick any set of what ifs you want positing increases in capacity utilization and relative fuel expenses but fares still only cover around half of the operating cost.

    Now whether this is poor p.r. or not is strictly a strategic ideological consideration. Fuel taxes have been front and center of whatever there was of issue substance in the Democratic primary campaign, except for the war (apparently a little thing) the only issue of real difference between Obama and Clinton. I think this is absolutely excellent p.r. and will begin to lay the ground for the value language of the energy policy and transportation debate between McCain and Obama. Its a small pushback politically against pandering on fuel prices. Has there been any other?

    The economic needs of mass transit are enormous more resources from many sources is absolutely necessary if state of good repair is to be maintained while costs go up. A good system is a prerequisite for increased ridership and ultimately system expansion.

  • On the face of it this seems like incredibly bad PR. No question that transit should be subsidized at least as much much per passenger-mile as private cars, but to connect it so closely with fuel prices is silly. It’s possible, though, that Nico is right and this is just silly enough to capture the public’s imagination.

    Also, I find it odd that the image that Ben chose to represent transit for this article is an electric light-rail train, which I believe gets its power from natural gas plants that would not be subsidized under this proposal

  • Ben Fried

    Cap’n — You caught me using a inappropriate choice of photo. I replaced it with one of NJTransit’s diesel-fueled Southern NJ line.

  • The point is that as fuel prices soar so does transit ridership. But the new demands placed on the old system will crush any chance of transit becoming a wothwhile option to get people out of cars.

    Increased use of transit and more transit investment will be beneficial to:
    1) The environment/global warming
    2) Demand for gasoline and deisel
    3) The economy in many ways
    4) Consumers pocketbooks
    5) Real Estate values
    6) Peace: Less money going to hostile nations in time of war
    These are the big issues facing America, Our proposal begins with fuel costs which are now resulting in highre fares and cuts in transit services. But we also propose massive re-investment in capital and operating funds by the federal government. We need, on an emergency basis to preserve and expand mass transit, It is a metter of national defense and economic survival.
    See Robert Reich’s comments:Tuesday, June 03, 2008
    “With Gas at $4 a Gallon, We Need Public Transportation, But Why We Can’t Get It”
    http://robertreich.blogspot.com/search?q=transit

  • Thanks for your comments, Larry. The problem is that calling it “funds to purchase fuel” obscures the high efficiency of transit.

    We should be paying for transit agencies to pay drivers, conductors and dispatchers; buy buses and trains; buy and install tracks, terminals and other facilities; and other costs not directly associated with fuel.

  • BTW, nice choice of replacement photo, Ben.

  • Larry Littlefield

    (Need for additional subsidy is partly due to the constant problem of farebox recoveries ratios below 1. Even with your calculations, each additional passenger only pays 40% of the cost of the new trip. Therefore additional passengers require additional subsidies, and I believe most system are not subsidized on a per/passenger basis. Can anyone confirm?)

    For those who didn’t take a lot of Econ, you need to distinguish between average and marginal cost. When the bus or train isn’t full, the marginal cost of adding an additional passenger is close to zero. The cost of adding passengers to full rush hour trains is high.

    One thing that has benefitted the MTA in recent years is the addition of off peak passengers. But this has been offset by a huge cut in the fare (relative to inflation), to a marginal rate of zero for unlimited ride cards.

    In most of the U.S. people are leaving cars at home or going from 2 to 1, not 1 to 0. So transit is still missing those all-profit off peak riders, even as rush hour capacity is used up.

  • Larry Littlefield

    BTW, it would require a lot of assumptions, but I’d love to see some serious cost accounting, with both the average and marginal cost (and subsidy) per ride for various rail and bus lines at the MTA and elsewhere. As it is we get averages, systemwide. “Rational” businesses price based on marginal cost and revenue.

  • “Rational” businesses price based on marginal cost and revenue.

    Rational governments price based on need and ability to pay.

  • zach

    What externalities are we including here? Everyone here is endlessly familiar with arguments that, economically speaking, we subsidize free blacktop and free on-street parking for drivers, and don’t expect those to pay for themselves, yet often we are rankled that transit fares don’t pay for themselves.

    Do we expect the costs of maintaining parking spaces to be completely covered by “fares” gained through gas taxes? Should we factor in the opportunity cost of not being able to use that land otherwise for creating revenue through commerce? If the parking is free, then the city is loosing the money it could get by renting those spaces to outdoor cafes, for example.

    Maybe simply the argument that on-street parking costs the city something should lead to universal metering, even if at a low rate.

  • zach

    What externalities are we including here? Everyone here is endlessly familiar with arguments that, economically speaking, we subsidize free blacktop and free on-street parking for drivers, and don’t expect those to pay for themselves, yet often we are rankled that transit fares don’t pay for themselves.

    Do we expect the costs of maintaining parking spaces to be completely covered by “fares” gained through gas taxes? Should we factor in the opportunity cost of not being able to use that land otherwise for creating revenue through commerce? If the parking is free, then the city is loosing the money it could get by renting those spaces to outdoor cafes, for example.

    Maybe the argument that on-street parking costs the city something should lead to universal metering.

  • Reich audio—quite good–listen here—right on point…..

    http://www.atu.org/atwork/transit_news/robert-reich-time-to-get-serious-about-transit.html

  • Orestes

    Of course public transit should be subsidized, but intelligently. Money should be invested in expansion, modernization, and conversion to better, safer, and more fuel-efficient transit.

    Buses, as they wear out, should be replaced by light rail (as the new systems in Paris) on dedicated lanes. Clean, quiet, smooth ride, electric, environmentally friendly, fast. Next best would be electric buses (Bus Rapid Transit, BRT) on dedicated lanes, but not as smooth or pleasant a ride, and I imagine not as safe.

    Freight transport is another issue often overlooked. Train transport for heavy freight is far more fuel-efficient, safe, and environmentally sound. So incentives and programs need to be put in place to make the transition back to rail.

    Orestes
    New York City

  • JK

    Why is this ATU fuel subsidy bad politics? The ATU is trying to use the windshield perspective to transit’s advantage. Clinton and McCain both endorsed a completely nonsensical gas tax holiday. It might well have passed congress if Bush/Cheney hadn’t criticized it. Here in NY, the legislature has done nothing to help the MTA despite killing congestion pricing. They don’t care about good policy, they care about compelling politics and personal experience. The pols all drive and are experiencing higher gas prices.

  • Niccolo Machiavelli

    Cap’n Transit plagerizes “Rational governments price based on need and ability to pay.”

    Who was it said “from each according to their abilities to each according to their needs”. Some whacko.

  • The Cap’n should have been more transparent in alluding to my work. I believe I was talking about the entire monetary system, not just government spending. My memory’s a bit rusty, though.

  • Larry Hanley

    http://www.atu.org/atwork/transit_news/ridership-s-up-but-no-one-s-talking-abt-better-system.html

    US, National:
    No one’s talking about building better transit -6/9/2008

  • You need to have better management in order to have better transit. Plus people willing to speak up and not just whisper.
    Soon to be ex-local 842 member

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