ASSESSING THE ARGUMENTS FOR URBAN TRANSIT OPERATING SUBSIDIES

Abstract

Operating subsidies to urban transit have been growing rapidly in recent years. In the near future they will probably pay one-third or more of the industry's operating expenses. Proponents argue that operating subsidies are desirable because (a) they alleviate problems with existing automobile and land use patterns (such as congestion, air pollution, energy consumption, and urban sprawl); (b) they create a more egalitarian distribution of income and mobility; and (c) they permit public transit to be priced at its marginal cost. Unfortunately, many of the arguments of subsidy proponents are implausible. The most plausible argument is not that operating subsidies should be used indiscriminately, but that they should be used to support only particular types of public transportation service. Local transportation authorities currently do not restrict their fare reductions to the appropriate types of service, and they are not likely to do so in the future.

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