Public mass transit outlook remains bleak
Mass Transit Agencies Brace for Continued Struggles as Federal Funding Expires
Mass transit agencies across the country are facing an uphill battle this year as they grapple with depressed ridership and the impending expiration of federal funding. According to S&P Global Ratings, the public transit sector has been given a negative outlook as operators spend down over $70 billion in federal aid provided during the COVID-19 pandemic.
While airports, toll roads, maritime ports, and parking operators have experienced a rebound, mass transit has not been as fortunate. Ridership currently stands at 77% of pre-pandemic levels, with significant variations between different regions and modes of transit.
U.S. Mass Transit Faces Unique Challenges
“Looking ahead to 2024, the outlier in this back-to-normal mobility story is U.S. mass transit,” states the latest sector report from S&P. ”Heavy regional commuter rail-only systems still face lower ridership due to remote work trends while bus and subway systems serving cities and metropolitan areas have performed better.”
While the report does highlight some positive aspects, mass transit agencies are expected to struggle in replacing fare revenue as more former commuters continue to work from home.
“Despite lower ridership, transit providers that rely heavily on tax revenue should maintain favorable metrics in 2024,” the report explains. “However, we still anticipate that public transit ridership will only recover to about 85% of pre-pandemic levels by 2026.”
Agencies with strong credit ratings and less reliance on fares are in a better position to weather the storm.
“For ‘AAA’ and ‘AA’ rated mass transit operators, tax revenue generally makes up more than 60% of total revenue, providing credit stability and offsetting declines in farebox revenue,” the report states.
However, agencies that have traditionally relied on fare-paying passengers for revenue face significant challenges ahead. As federal funding runs out, these fare-dependent agencies are searching for alternative sources of income.
In Chicago, for example, the Regional Transportation Authority has proposed various tax and fee hikes to fill the funding gap. These include congestion pricing, a vehicle miles traveled tax, expanding sales tax coverage areas, increasing vehicle registration fees, and raising the gas tax.
Transit ridership was already declining before the pandemic, and the situation worsened dramatically. In 2014, public transit agencies reported 10.7 billion unlinked passenger trips, but by 2019, that number had dropped to 9.9 billion. In 2020, due to the impact of COVID-19, unlinked passenger trips plummeted to 4.7 billion, representing a more than 50% decrease in just one year.
While ridership has partially recovered since the pandemic, challenges persist. The search for sustainable tax and revenue models to support operating and capital requirements remains an ongoing topic of debate, with crucial decisions to be made in the coming months.
What strategies can mass transit agencies implement to address the long-term impact of remote work on ridership and ensure sustained revenue generation in the absence of federal funding
Acing the loss of federal funding. Many agencies have relied on funds provided by the federal government to sustain operations during the pandemic, but as these funds expire, they will have to find alternative sources of revenue or make difficult budget cuts.
One of the main challenges facing mass transit agencies is the decrease in ridership. The fear of contracting the virus and the implementation of social distancing measures have deterred many people from using public transportation. As a result, ridership levels are still far below what they were before the pandemic. This decrease in ridership directly affects the revenue generated by mass transit agencies, making it harder for them to cover their operational costs.
The variation in ridership levels between different regions and modes of transit is also a significant concern. Some areas may see higher ridership on buses and subways, while others may see a decline in commuter rail usage. This variation makes it difficult for agencies to rely on consistent revenue streams and plan for the future effectively.
Furthermore, the report emphasizes that the transition to remote work has a lasting impact on mass transit ridership. With more companies adopting remote work policies and employees having the flexibility to work from home, the demand for mass transit may continue to be lower than it was before the pandemic. This presents a unique challenge for agencies that primarily rely on commuter rail services.
With the expiration of federal funding, mass transit agencies will have to find new ways to generate revenue and sustain their operations. This may involve exploring options such as increasing fares, securing partnerships with private companies, or seeking additional support from state and local governments. However, these solutions may not be enough to bridge the financial gap left by the loss of federal aid.
The struggles faced by mass transit agencies have broader implications for the communities they serve. Public transportation is vital for many individuals who rely on it for daily commutes, access to essential services, and reducing traffic congestion. As agencies grapple with financial challenges, there is a risk of reduced services, increased fares, or even service cuts in some areas. These consequences would disproportionately affect low-income individuals and communities who depend heavily on public transportation.
In conclusion, mass transit agencies across the country are facing significant challenges as federal funding expires. The decrease in ridership, variation in usage between different regions and modes of transit, and the long-term impact of remote work all contribute to the struggles faced by these agencies. As they strive to find alternative sources of revenue and sustain their operations, it is crucial for state and local governments to provide support and ensure that public transportation remains accessible and reliable for all members of the community.
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