URBAN TRANSIT PROFITABILITY BY ROUTE AND TIME OF DAY

One of the major initiatives of current federal urban transportation policy is to promote private-sector involvement in planning, operating, and financing urban mass transit services. One means of rapidly expanding private participation in the provision of urban transit service is for the public authorities that now operate almost all transit service in U.S. urban areas to contract with private firms to assume the operation of certain services. Many of the public authorities that now provide these services have objected that such contracting out would skim the cream from their systems. By this, they apparently mean that private firms would agree to acquire only those services that earn revenues in excess of their operating costs, thus leaving public authorities with increased deficits and no opportunities to cross-subsidize them from profitable sources. The question of whether the public authorities that currently provide mass transit services in the nation's urban areas are able to operate any of those services profitably is explored in this paper. A major conclusion is that extremely few, if any, urban transit services now operated by public agencies in U.S. cities generate farebox revenues sufficient to cover even their direct, day-to-day operating expenses. Furthermore, farebox coverage of operating expenses appears to be lowest for exactly those services in which both actual and potential private participants have exhibited the greatest interest, so that there appears to be little risk that widespread contracting out of urban transit service will produce increased deficits for any of its current operators.