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The future of transit funding

Author

Account Director Katherine Carlson has unique knowledge of the transit/transportation industry. Not only does she have 20 years of experience in advertisement and brand management, but 14 years of managing transportation and transit accounts, specifically.

As Americans take more trips on public transportation — 10.7 billion in 2013 — and the number of organizations that provide public transportation continue to grow, funding in the transit industry is becoming increasingly competitive. We asked Katharine to share some insights and thoughts about the future of transit funding in the United States.

How are transit systems funded?

The first thing that comes to mind when thinking of how public transit is funded is the fare that riders pay. In reality, farebox revenue comprises roughly 25 to 50 percent of funding. The primary sources of funding comes from government — federal, state and local — and independent public agencies.

Each year, the federal government spends about $50 billion dollars to support public transportation primarily for capital funding — equipment, construction. Of that amount, $46 billion comes from gasoline taxes (18.3 cents per gallon) and diesel fuel taxes (24.4 cents per gallon), which is also known as the Highway Trust Fund.

Two factors have a serious impact on the viability of the Highway Trust Fund. First, the federal gasoline tax is fixed at a per-gallon rate and is not adjusted to actual fuel cost or inflation, like most taxes, so over time it falls further and further behind spending. Second, the increasing number of fuel-efficient vehicles and the reduced-driving behaviors of Americans has lead to the near-insolvency of the Highway Trust Fund. This shortfall of money has pressured Congress to pass a bill to temporarily support the fund through pension smoothing, customs user fees and transferring money from another trust fund (CBS News).

Though the Highway Trust Fund is significant for capital spending by transit agencies, almost of all its operating subsidies comes from local and state levels. These funds come from a wide variety of sources ranging from independent system-dedicated sales taxes to general fund contributions from municipalities and states. The recent recession severely curtailed some of this funding and most transit agencies are in the process of catching up as ridership generally increases.

What is the future of transit funding?

Historically, highway systems have gotten the lion’s share of federal funding while transit has had to work hard for the remaining portions. As capital improvements increase across the nation, everyone will have to compete even harder for the diminishing funds. Systems must be prepared to prove their Return On Investment, which they may not have had to in the past.

In regards to advertising and marketing, systems will need to shift efforts to growing stakeholder awareness and marketing the benefits of public-private partnerships. For smaller systems, they are used to competing for funding, but now is the time to be creative. Demonstrating the positive impact a system will have on the environment, businesses, neighborhoods and regions will provide better opportunities for systems to demonstrate a more comprehensive ROI, hence broadening net of funding opportunity.

In the next 10 years, there will be more alternatives modes of transportation. Millennials are leaning toward alternative modes such as public transit, carpooling, walking or riding a bike to their destination. Measurements such as CO2 emissions and annual tax increases will have a larger role in funding evaluation. While the funding sources for public transit sources is a work in progress, the progress will have to respond quickly and systems will need to increase their utility, because we are seeing continued ridership growth around the nation.

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