Unsustainable Transit: New York City

COST Comments: This article raises the obvious question: If New York transit is not sustainable, why would one believe that Austin mass transit (rail transit) is sustainable? It is not and there are far more cost effective ways to address mobility and transit needs in a city like Austin.

by Wendell Cox 05/07/2009

When it comes to transit, as like many things in the United States, there is no place like New York City. The subways and buses of the New York City Transit Authority (NYCTA) carry more than 40 percent of the nation’s transit rides (unlinked trips). To account for 40 percent of the nation’s ridership is quite an accomplishment inasmuch as the city represents less than 3 percent of the nation’s population.

Of course, New York City’s ridership domination stems from the evolution of an ideal environment for transit. Most of the ridership comes from the heavily urban boroughs of Manhattan, Brooklyn, Queens and the Bronx, with a much smaller ridership in Staten Island, most of which looks like the second ring adjacent New Jersey suburbs. The four highly urban boroughs have exceedingly high population densities, averaging above 30,000 per square mile. The city of San Francisco, with its reputation for density, is little more than one-half as dense. The four boroughs are nearly as dense as city (23 ku area) of Tokyo, denser than most European core cities and nearly three times as crowded as Amsterdam.

The most important factor, however, is the concentration of destinations in the central business district, south of 59th Street in Manhattan. This is the world’s second largest central business district and the home of approximately 2,000,000 jobs. Only the geographically larger business district inside Tokyo’s Yamanote Loop has more jobs. The Manhattan business district (really two, Uptown and Lower Manhattan and the area between) has at least four times as many jobs as Chicago’s Loop, the second largest central business district in the nation.

The share of people commuting to work by transit is far higher than anywhere else in the nation. Approximately 75 percent of the people commuting to jobs in Manhattan get there by transit. Approximately 55 percent of the city’s working population commutes by transit, double the percentage of automobiles. By comparison, other highly urbanized central cities have far smaller transit work trip market shares, with Boston at 34 percent, San Francisco at 33 percent and Chicago at 26 percent. In each of these cities, considerably more people commute by car than by transit.

Suffice it to say that New York is the penultimate transit city. If transit is the answer anywhere, it is the answer in New York.

Yet the history of New York City Transit Authority has been one of financial crisis. From the NYCTA’s founding in 1953, transit riders of New York City have been faced by recurring threats of service reductions and fare increases. Over the years, transit fares have risen sharply despite increased subsidies. The financial downturn has generated yet another financial crisis at NYCTA, as well as at many other transit agencies around the country. There may be a financial bail-out from Albany, or there could be significant fare increases or service reductions. But the present financial crisis is by no means the first and it is unlikely to be the last. The problem is that transit is characterized by perverse incentives that keep if from focusing on its principal mission.

Transit’s mission, as my late Los Angeles County Transportation Commission colleague (and Santa Monica city councilwoman) Christine Reed so eloquently put it, is to serve both riders and taxpayers. Regrettably, however, the riders and taxpayers routinely take a back seat to other more concentrated and powerful groups with a strong interest in getting themselves more money and scant interest in cost efficiency.

As a result, the story is always the same in New York and elsewhere. Financial crises are characterized as funding crises and the answer to every question is more money. Little or no serious attention is paid to the cost side of the equation. In the present environment, the riders and the taxpayers are unlikely to ever be able to provide enough money to make transit financially sustainable.

Both labor and management operate in an environment of perverse incentives. Labor unions understandably seek to improve the wages and working conditions of their members. In a competitive environment, there are some limits. But transit remains immune to competitive pressures; it is rather a political environment. Transit board members are appointed by elected officials, many of whom rely heavily on political contributions from labor unions and their often sophisticated get out the vote operations.

Transit managers must live with this reality and any who become too courageous in their dealings with transit labor can expect to be shown the door. At the same time, transit labor negotiations are often not really conducted between parties across the table from one-another. Indeed, often the table is shoved up against the wall, since the gains that are won by the labor unions are largely duplicated in the pay and benefits packages of transit managers. Thus, costs are higher in transit – whether at NYCTA or at other agencies – than they would be for similar work in the private sector.

One might expect transit to face frequent crises in Eugene, Madison or even Los Angeles or Seattle. But New York City? Perverse incentives are the problem, but other cities have managed to have successful transit systems without such incentives. In some of the world’s largest cores, such as Tokyo and Hong Kong, transit obtains virtually all of its funds from commercial revenues, principally fares. Without access to the deep pockets of taxpayers, transit is required to live within their means. Serious attention is paid both to funding and costs. It may be too much to ask for transit in New York City to be converted from its heavy subsidies to a profitable operation. But improvements can be made.

In transit operations, one answer is competitive contracting (competitive tendering), whereby the transit agency seeks competitive bids on bus and rail routes for private operation. The competitive market reduces costs, while the transit agency specifies all aspects of the service. The best example of competitive contracting in the world is the London Transport bus system, which is the largest city bus system in the developed world. Buses are operated by multiple private contractors, under the control of Transport for London, which determines fare levels, routes, schedules and transfer arrangements. To the public, London Transport’s buses look and act like a single system. There is, however, a big difference. Competitive contracting has reduced costs per mile by nearly 40 percent after adjustment for inflation over the past 25 years. The savings have been plowed back into substantial service increases, which have led to strong ridership increases. Subway operating costs have also been reduced through competitive contracting, such as in Stockholm.

But so long as the focus is on revenues and costs are largely ignored, the only thing sustainable about transit in New York City will be its fiscal crises. Even if there is an eventual financial bailout of NYCTA this time, expect the clock to start ticking towards the next inevitable crisis.

Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris. He was born in Los Angeles and was appointed to three terms on the Los Angeles County Transportation Commission by Mayor Tom Bradley. He is the author of “War on the Dream: How Anti-Sprawl

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