The Urban Transit Challenge

As cities continue to become more dispersed, the cost of building and operating public transportation systems increases. For instance, as of 2015, about 201 urban agglomerations had a subway system, the vast majority of them being in developed economies. Furthermore, dispersed residential patterns characteristic of automobile-dependent cities make public transportation systems less convenient to support urban mobility. Additional investments in public transit often do not result in significant additional ridership. Unplanned and uncoordinated land development has led to the rapid expansion of the urban periphery. By selecting housing in outlying areas, residents restrict their potential access to public transportation. Over-investment (when investments do not appear to imply significant benefits) and under-investment (when there is a substantial unmet demand) in public transit are both complex challenges.

Urban transit is often perceived as the most efficient transportation mode for urban areas, notably large cities. However, surveys reveal a stagnation of public transit systems, especially in North America, where ridership levels have barely changed in the last 30 years. The economic relevance of public transit is being questioned. Most urban transit developments had little impact on alleviating congestion despite mounting costs and heavy subsidies. This paradox is partially explained by the spatial structure of contemporary cities, which are oriented along servicing individual mobility needs. Thus, the automobile remains the preferred mode of urban transportation.

Besides, public transit is publicly owned, implying a politically motivated service that provides limited economic returns. Even in transit-oriented cities, transit systems depend massively on government subsidies. Little or no competition within the public transit system is permitted as wages and fares are regulated, undermining any price adjustments to ridership changes. Thus, public transit often serves the purpose of a social function (public service) as it provides accessibility and social equity, but with limited relationships with economic activities. Among the most difficult challenges facing urban transit are:

·         Decentralization. Public transit systems are not designed to service low density and scattered urban areas dominating the urban landscape. The greater the decentralization of urban activities, the more difficult and expensive it becomes to serve urban areas with public transit. Additionally, decentralization promotes long-distance trips on transit systems causing higher operating costs and revenue issues for flat fare transit systems.

·         Fixity. The infrastructures of several public transit systems, notably rail and subway systems, are fixed, while cities are dynamical entities, even if the pace of change can take decades. This implies that travel patterns tend to change with a transit system built for servicing a specific pattern that may eventually face “spatial obsolescence”; the pattern it was designed to serve no longer exists.

·         Connectivity. Public transit systems are often independent of other modes and terminals. It is consequently difficult to transfer passengers from one system to the other. This leads to a paradox between the preference of riders to have direct connections and the need to provide a cost-efficient service network that involves transfers.

·         Automobile competition. Given cheap and ubiquitous road transport systems, public transit faced strong competition and lost ridership in relative terms and, in some cases, in absolute terms. The higher the level of automobile dependency, the more inappropriate the public transit level of service. The convenience of the automobile outpaces the public service being offered.

·         Construction and maintenance costs. Public transit systems, particularly heavy rail, are capital intensive to build, operate, and maintain. Cost varies depending on local conditions such as density and regulations, but average construction costs are around $300 million per km. However, there are exceptions where cost overruns can be substantial because of capture by special interest groups such as labor unions, construction companies, and consulting firms. When there is inefficient regulatory oversight, these actors will converge to extract as much rent as possible from public transit capital improvements. The world’s highest subway construction costs are in New York. For instance, the Second Avenue subway extension in Manhattan, completed in 2015, was done at the cost of $1.7 billion per km, five to seven times the average in comparable cities such as Paris or London. This project employed four times more labor, with construction costs 50% higher.

·         Fare structures. Historically, most public transit systems have abandoned a distance-based fare structure for a simpler flat fare system. This had the unintended consequence of discouraging short trips, for which most transit systems are well suited for, and encouraging longer trips that tend to be costlier per user than the fares they generate. Information systems offer the possibility for transit systems to move back to a more equitable distance-based fare structure, particularly with smartcards that enable to charge according to the point of entry and exit within the public transit system.

·         Legacy costs. Most public transit systems employ unionized labor that has consistently used strikes (or the threat of labor disruptions) and the acute disruptions they create as leverage to negotiate favorable contracts, including health and retirement benefits. Since public transit is subsidized, these costs were not well reflected in the fare systems. In many transit systems, additional subsidies went into compensation or covered past debt, not necessarily into performance improvements or additional infrastructure. As most governments face stringent budgetary constraints because of social welfare commitments, public transit agencies are being forced to reassess their budgets through an unpopular mix of higher fares, deferred maintenance, and the breaking of labor contracts.

·         Self-driving vehicles. Developments in information technologies let anticipate in the coming years the availability of self-driving vehicles. Such a development would entail point to point services by on-demand vehicles and a much better utilization level of such assets. This system could compete directly with transit systems due to its convenience, comfort, and likely affordability

Therefore, public transit systems are challenged to remain relevant to urban mobility as well as to increase its market share. The increasing volatility in petroleum prices since 2006 provides uncertainties in the costs of transit fleet ownership and operations and how effective it is to convert transit fleets to alternative energy sources. A younger generation with a preference in living in higher density areas perceives the automobile as a less attractive proposition than the prior generations. Electronic fare systems are also making the utilization of public transit more convenient. A recent trend concerns the usage of incentives, such as point systems (e.g. air miles with purchase of a monthly pass), to promote public transit and influence consumer behavior. Yet, evidence underlines that the inflation-adjusted cost of using public transit is increasing, implying that the cost advantage of public transit over the automobile is not changing in a significant manner. If self-driving vehicles become a possibility, many highly subsidized transit systems may have limited competitive advantage. Under such circumstances, the fate of many surface public transit systems will be in question.