Friday, February 8, 2013

Transport Finance without the Feds: The Canadian Model

Transport planning and policy in the United States is dominated by the federal gas tax. Currently 18.6 cents per gallon of gas and 24.6 cents per gallon of diesel, federal gas taxes are used to guide preferred transport investment across the country. For the past forty or so years, the federal gas tax has, in the words of Lisa Schweitzer, been buying everyone’s lunch. Yet all is not well. The federal gas tax hasn’t increased in 20 years, reducing the absolute and relative buying power of the revenue. Increased federal regulations and interest groups limit what the gas tax can be used for, and a steady stream of other people’s money (federal dollars) creates incentives to spend on transport projects that offer few benefits. At an extreme, transportation projects are developed and financed by federal monies withouteven bothering to claim any transportation benefits.

The declining share of federal money for transport finance has many people worried that transportation policy and finance will devolve to the states. Such devolution of authority is viewed as a necessarily lousy outcome, especially by progressives. (Richard Florida even wants a cabinet position for a Department of Cities. We didn't get urban renewal right the first time, so let’s try again, but with even more authority.) From my perspective, the status quo for transport policy and finance cannot be objectively defended as a success. Looking at the period of about 1971 (the year Amtrak was formed is a good marker of the beginning of the current era of federal policy, but just about any year between 1964-1974 works) to present US transport systems declined in nearly all measures of productivity, economic performance, social welfare, or just about anything else you care to measure. For whatever occasional successes US policy has had, the nation has received an extremely poor return on investments made. We can do better.

An experiment devolving transport policy and finance to the states is likely to improve overall performance of all aspects of transport. For evidence we can look to out chilly northern neighbors in Canada, which does not have anything equivalent to the U.S. Department of Transportation. Transport policy is the responsibility of the provinces, and transit policy is the responsibility of the cities. So how do Canadian cities compare?
The table below is drawn from Paul Mees’ work. The city regions are sorted by transit mode share. Every major Canadian region has higher transit mode share than US cities except New York, Chicago and San Francisco. The simple correlation between density and transit share is .48, so density does not adequately explain the differences. (Paul Mees wrote the book on this issue.) Canadian transit systems also have much higher farebox recovery ratios than in the US. The Toronto system has to maintain greater than 70% farebox recovery is order to receive subsidy for the balance.

Last week a new report on Toronto area transport finance was published that explains the financing structures in place there and potential future monies. Here is a link to the report. The authors promote many taxes and fees, all of which are economically sound and focus on raising money for transport by charging those who benefit from a well-functioning transport system. Essentially, if the Greater Toronto Hamilton Area needs new transport investment to maintain and improve economic competitiveness then they can and should raise the money locally.

 Local control can also lead to service innovations. David Levinson highlighted TransLink in Vancouver. Here is how he described the agency’s service:
TransLink is the multi-modal transportation organization for Greater Vancouver, BC, and it is unlike what we see in the States. It is in fact, closer to the idea described in Enterprising Roads, a transportation utility with autonomy constrained by oversight.One of the key points to consider is that metropolitan Vancouver has a transit mode share of 21%, comparable with much larger Toronto and Montreal (though behind metro New York's 30%, it is well ahead of Seattle's 9%), despite ranking 34th in population. Some of that has to do with institutional factors and governance.

In addition to service innovation and the ambitious expansion plans in Toronto, British Columbia instituted a carbon tax a few years ago, though this may not survive a scheduled vote in May. There are certainly problems with the decentralized system. Some Canadians want a national transit agency. Fragmented governance in regions makes coordination difficult, and perhaps a stronger regional agency is needed. Most difficult, perhaps, is that many cities forego transit service all together.* However, eliminating unproductive transit so that resources can be used elsewhere is actually good policy. But by nearly every measure Canadian transport policy outcomes are superior to US outcomes. Whether US transport finance and policy devolves to the states remains to be seen, but it certainly isn’t something that should be dismissed as inferior to what we have now. It may well be better.

*This sentence was removed as it is incorrect (I had bad info on this case, but the larger point remains):"The city of Guelph, for instance, has 120,000 people but no bus service. "
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