December 2003
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Introduction
The September 11, 2001 terrorist attacks and unfavorable economic conditions
experienced across the United States since mid-2001 have taken a toll on all
transportation sectors. Public transportation reported a ridership decline
during the past 12 months after six straight years of continuous increases.
In August 2002, The American Public Transportation Association (APTA) conducted
the first survey on its transit system members to determine the impact of
this economic downturn on transit ridership and finance. This report is the
second of such efforts. Questionnaires were sent to 350 transit agencies in
the United States and Canada. As of August 1, 2003, 104 responses had been
received, representing a response rate of 30%. The respondents included
22 large transit agencies (30 + million unlinked trips/year)
30 medium (5-30 million unlinked trips/year)
52 small (less than 5 million unlinked trips/year)
The survey shows that the economic downturn has produced substantial negative
impacts on the transit industry. Principal findings are summarized below.
Detailed comparison of the 2002 and 2003 surveys are shown in Exhibits 1 and
2.
IMPACT
Decreased Ridership. Fifty-seven percent of the transit
agencies reported ridership declines in both peak and off-peak hours. "Large"
transit systems in urbanized areas suffered the most. Seventy-four percent
of these properties reported ridership declines, while 59% of medium and 50%
of small properties experienced a decline.
Decreased Government Funding. The problems for transit systems with
decreased ridership and resulting drops in fare revenues are compounded by
drops in state and local government contributions because of their own financial
problems. Fifty-six percent of all reporting agencies showed a decrease in
government funding during the past fiscal year. Fifty-nine percent 59 % of
larger agencies reported government funding drops, compared to 50% and 58%
for agencies of medium and smaller sizes, respectively.
Decreased Non-Operating Revenues. Non-operating revenues, such as
advertising revenues and interest earnings on short-term accounts, have also
decreased for those systems that have such revenues. In this category, 63%
of large systems reported a decrease while 36% and 43% of medium and small
systems, respectively, experienced that trend.
Increased Premiums for Property and Liability Insurance.
Insurance premiums appear to have been the highest cost increases experienced
by the largest number of transit agencies. These occurred for both property
and liability insurance. Eighty-four percent of the transit agencies showed
liability insurance premium increases, and 76% reported raises in property
insurance premiums. The average increases were 64% for property insurance
premiums and 56 percent for liability insurance premiums. This trend will
not stop, as three-quarters of the responding agencies predict the costs for
both types of insurance will continue to increase in the future.
Increased Budget Deficits. All the above factors added
to the unavoidable pressures on budgets of transit agencies. Even with substantial
innovations and belt-tightening actions taken (see below), 54% of transit
systems reported an increase in operating deficits. Because of larger ridership
decreases, more large transit systems (63%) experienced increased deficits
than medium and small systems (50% and 52%, respectively).
ACTIONS TAKEN
Facing drops in both fare revenues and government subsidies, transit systems
have taken necessary actions. They have found ways to cut costs and increase
revenues. Sometimes, they found it necessary to reduce services.
Cost Reduction. Administrative services suffered the
most from cost reduction. Seventy-three percent (73%) of respondents have
reduced their administrative costs. Sixty percent (60%) of systems have elected
to delay their capital projects. Hiring freezes and staff reductions are next
with over 50% of the transit agencies taking these steps. The last resort
was to defer maintenance because of its potentially serious effects. Even
so, 22% of transit respondents reported they had taken that route.
As expected, large transit systems that have experienced
the greatest ridership decreases were forced to take more drastic actions.
Ninety percent (90%) of these systems reported they had cut administrative
expenses, 68% delayed capital projects, 80% froze hiring, 74% actually reduced
staff, and 39% were forced to defer maintenance.
Increase Revenues. The fastest way to increase operating
revenues is to dip into reserves. However, many transit systems have no reserve
funds; still about 59% of all respondents reported doing so. Increasing fares
is the next option. However, it tends to involve more approval processes and
requires more time to implement. Furthermore, this may not be a viable option
for many transit systems since they already instituted a fare increase in
the previous year. Forty-six percent (46%) of transit systems have increased
their fare, and the remainder expects it to happen in the future. The survey
results indicate that some transit systems may have to implement more than
one fare increase.
Reduce Services. When cutting expenses and increasing
revenues are not sufficient to reduce increasing budget deficits, transit
systems must resort to reducing services. Twenty-two percent (22%) reduced
the fleet size and twice that, 44%, provided less frequent services. Fifty-two
percent (52%) of the respondents reported that they have delayed the implementation
of new services and 36% have abandoned certain route segments. Again, facing
a steeper decrease in ridership, large systems took more drastic actions.
CONCLUSION
The transit industry was heavily hit by corporate layoffs
that resulted in reduced work-related transit trips. Fare revenues dropped,
government funding decreased, and reduced dedicated tax revenues resulted
in rising operating deficits. Transit systems have been forced to find means
to deal with these problems. Cutting administrative expenses was first chosen
by most transit systems. Fare increases and delayed implementation of new
services were the next options. Service reductions, not a desirable solution
for many systems, have already occurred and are expected to continue until
economic conditions show notable gains.
For additional information, contact Dr. Larry Pham at (202) 496-4813, email:
lpham@apta.com
EXHIBIT 1
EXHIBIT 2
NOTES ON THE 2002-2003 TRENDS
(ALL TRANSIT SYSTEMS)
The distribution of the size of transit systems responding to the survey in 2002 and 2003 is relatively consistent, allowing for some comparison to be made between the two years.
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Between 2002 and 2003, fewer transit systems reporting ridership declines in either peak hours (64% decreasing to 57%) as well as off peak hours (64% to 55%). This may be a sign that the economic recession is easing off.
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More transit agencies apparently have experienced increases in insurance costs (62% to 76% for property insurance and 68% to 84% for liability insurance). Furthermore, the increases have been very large, averaging 64% and 56% for property and liability insurance, respectively.
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The number of agencies with impacts on tax and government revenues appears not to have changed significantly from 2002 for transit agencies (as a
group).
The number of agencies taking actions to alleviate the negative financial impact has increased substantially between 2002 and 2003.
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More transit systems instituting a fare increase (37% in 2002 increasing
to 46% in 2003)
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More agencies are using up reserves to finance current expenses (46%
to 59%)
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More and more transit systems are reducing services, in terms of
-
Reducing fleet size (17% to 22%)
-
Less frequent services (34% to 43%)
-
Abandoning route segments (28% to 36%)
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Delaying implementation of new services (39% to 52%)
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More transit agencies further cut expenses, freeze hiring or reduce staff
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Cut Administrative Expenses ( 55% to 73%)
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Reduce staff (34% to 51%)
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Freeze hiring (36% to 56%
-
It is of major concern that the number of transit agencies forced to defer maintenance to save money has doubled that of 2002 (11% to 22%).
EXHIBIT 3
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