The allocation of federal and state transit assistance on the basis of population, employment or other demographic or geographic characteristics promotes policies which may not correspond to state or federal policies toward transit. Allocation formulas must be designed to provide operators with an incentive to comply with governmental policy. In addition, existing allocation procedures fail to promote effectiveness and efficiency in transit.service. Forty-nine performance indicators are analyzed on the basis of data availability, methodological correctness, and bias, and five are selected which measure system effectiveness and efficiency and allow comparison of one system against another. These indicators may be utilized in a subsidy allocation system providing both support for basic transit services and incentives for increased efficiency.
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