Operating subsidies and transit efficiency: applying new metrics to old problems

This research revisits the perennial policy concern that operating subsidies hamper transit efficiency. We argue that the relationship between subsidies and efficiency can be better understood at the regional level and propose improved metrics related to transit efficiency. To begin, we focus on the impact of subsidies on transitsheds rather than transit operators to recast subsidy as a per resident metric, and we average vehicle load in the transitshed as our efficiency metric. Comparing these measures, we discover a surprising trend – transit efficiency is strongly and positively correlated with per resident operating subsidy. To explore this relationship further, we decompose per resident subsidy into federal and non-federal components and generate several new measures to improve modeling of transit efficiency at the transitshed level—subsidy revenue ratio, vehicle ratio, and guideway mile ratio (the latter two of which are scaled by “effective” population). We then apply a linear regression with these new measures on four years of data across the fifteen most populous transitsheds in the United States. Results suggest that operating subsidies promote transit efficiency (with federal subsidies being roughly three times as effective as non-federal subsidies) as long as the subsidies do not unduly outpace revenues. Results also suggest that the vehicle ratio is negatively associated with transit efficiency while the guideway mile ratio is positively associated. These findings offer support for operating subsidies that are reasonably offset by revenues and for targeting capital investments towards fixed guideway infrastructure rather than towards expanding fleet size.