In recent weeks, it has become clear that public transportation is an integral part of the U.S. public health response to COVID-19, continuing to serve millions of trips: Health care workers going to and from their shifts; cleaners, warehouse staff, and food workers reporting to their jobs; utility employees; people making essential trips to purchase food at grocery stores and medicine at pharmacies.
Yet transit agencies across the country are under immense financial pressure due to:
- Sharp declines in fare revenue as large numbers of Americans shelter at home and reduce their travel.
- Reduced economic activity which has led to reductions in local and state sales, payroll, and other taxes that fund public transportation service–and which will put pressure on other local and state government support for transit. In addition, some transit agencies rely on taxes that must be renewed by voters in 2020; if those elections are postponed, agencies may face further shortfalls.
- Additional costs associated with confronting COVID-19, such as accelerated cleaning of vehicles, protective gear for employees, agencies opting to end fare collection in order to protect public health, and emergency staffing.
Public transit agencies cannot weather this crisis through cuts. In order to maintain proper social distancing, transit agencies must operate enough service so that riders are not subject to crowded vehicles.
We estimate that, depending on the extent of social distancing measures that are required over the next year, transit agencies could see an annual shortfall of $26-$38 billion. In this summary, we provide snapshots of current impacts on local agencies and provide two scenarios outlining the potential cumulative impact on transit agencies nationwide.
Public Transportation Agencies Are Responding to The Crisis
Transit agencies across the country are an essential part of the public health response to COVID-19. Ridership has varied by place. Some examples:
- In Seattle, ridership on King County Metro buses has declined by about 45%, while Sound Transit rail and buses have fallen 67%. King County Metro estimated that per-week, it is losing $1.3 million in fare revenue and $5 million in sales tax revenue, and spending an additional $25,000 for extra cleaning. (This represents a 39% decline in sales tax revenue from a typical week in 2019, when King County Metro collected $12.8 million in sales tax revenue per week).
- New York City subway ridership is 67% lower than a year ago (which still means it is serving 1.8 million trips/day).
- As of March 18, Bay Area Rapid Transit ridership was 87% lower than on an average February 2020 weekday. The Bay Area has been under a “shelter in place” order; all of California was put under such an order this week.
- In a March 17 letter, Dallas Area Rapid Transit estimated a $60 million sales tax loss from March-September 2020; this would represent a 19% decline from projections in the agency’s FY20 business plan, The agency also estimated $600,000/week revenue loss and $100,000/week in increased costs.
- Agencies around the country are modifying protocols to protect public health. Houston METRO announced it would increase service on key routes in order to reduce crowding. Several agencies, including Houston METRO, have eliminated fares or moved to rear-door boarding in order to maintain social distancing.
What Might the Financial Impact on U.S. Transit Be?
Transit agencies will face intense financial pressure because of reductions in fare revenue, dedicated tax receipts and, potentially, local and state support. Below, we provide two illustrative estimates of what this may mean for agency finances if social distancing continues over the next 12 months, using 2018 transit funding figures from the National Transit Database.
Notes: 2018 transit funding from National Transit Database “Funding Sources” table. Low-end estimate assumes 75% decline in fares; 30% decline in agency-levied taxes and fees and local sales tax; 19.8% decline in non-fare directly generated agency revenue and local and state support not including local sales tax. High-end estimate assumes 100% decline in fares; 55% decline in agency-levied taxes and fees and local sales tax; 29.7% decline in non-fare directly generated agency revenue and local and state support not including local sales tax.
We calculate two scenarios for transit fare and directly generated revenue decline: 75 and 100 percent. Fare revenue will decline by more than ridership, because many systems have ended fare collection and/or fare enforcement to decrease social contact. The low-end estimate of 75 percent is in line with ridership declines that several major systems are currently reporting. The high-end estimate (no fare revenue) represents a scenario where transit agencies end fare collection in order to protect public health.
We calculate a 30 percent decline in agency-levied taxes and fees and local sales taxes in our low-end scenario; this represents a blend of sales tax decline projections from agencies cited above. In the high-end scenario, we assume a 55 percent decline, where tax receipts decline somewhat more than currently seen in places operating under “shelter in place” orders.
To calculate the estimated change in other local and state government support for transit, we start by examining the impacts of the “great recession” of 2007-09, which put substantial strain on local and state budgets. During the worst quarter of the recession (Q2 2009), local and state government receipts fell by 9.9% year-over-year, not including federal grants in aid.
However, the economic impact of COVID-19 on the U.S. will be significantly worse; weekly unemployment claims in many states are already twice as high as they were in any week during the 2007-09 recession. Therefore, at the low end of our estimate, we assume that local and state support, not including local sales tax, declines by 19.8% (twice as large as declines seen during the 2007-09 recession). At the high end, we assume that local and state support, not including local sales tax, declines by 29.7% (three times as large as declines seen during the “great recession”). We assume identical percentage declines in non-fare agency generated revenue (advertising, concessions, etc.) and no change in federal support.
Finally, the American Public Transportation Association has estimated that transit agencies face $1.75 billion in direct costs related to COVID-19 for the six months of March-September 2020. In the low-end scenario, we double this to $3.5 billion to extrapolate to an annual figure, and add $350 million which is APTA’s estimate for costs associated with the restart of normal operations. For the high-end scenario, we increase the figure by 20% to represent contingencies.
 TransitCenter analysis of BEA National Income and Product Accounts.
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