FINANCING PUBLIC TRANSPORTATION

Conceptual issues involved in the subsidy problem are discussed and the transit industry deficit is analyzed. Several possible subsidy mechanisms are described and evaluated. Subsidy mechanisms should be tested against their ability to assist in providing increased access to a variety of different destinations. The allocation of resources, classes of grantors, and classes of recipients are reviewed. The administrative costs of a subsidy program will be influenced by the ranking of objectives to be achieved in a subsidy. The criteria that must be applied to a subsidy mechanism are set forth: how much can it be expected to increase mobility; will it resource allocation, how efficient is it, how equitable is it in terms of impact on different groups of travelers in a city; will it encourage innovation; how much will it cost to administer. The concept of deficit is defined and the deficits of bus-only firms, multimodal firms and commuter rail are reviewed. The observation is made that transit deficits are symptomatic of this problem and not the problem. deficit-related subsidies, cost-related subsidies, output related and demand-related subsidies are described and analyzed. None of the mechanisms show promise of solving the fundamental problems of transit. Little is known of the responsiveness of demand to various changes in transit operations and as a result, it would be unwise to place stringent conditions on firms recieving subsidies or to make subsidy contingent on the submission of a plan for service improvements.