Raise My Taxes, Please! Financing High Quality Public Transit Service Saves Me Money Overall

Todd Litman's picture

Most North American cities offer only basic public transit service, with limited coverage and frequency, modest speeds, unattractive waiting areas, poor land use integration, and few amenities. Such service is used primarily by people who lack alternatives. In such communities, riders tend to abandon public transit as soon as feasible.

In cities with high quality public transit even affluent people often use alternative modes. In addition to travel shifted directly to transit, high quality transit tends to leverage additional vehicle travel reductions by stimulating compact, mixed, walkable development. As a result, residents of communities with high quality public transit tend to own fewer vehicles and drive less, and spend less on transportation, than they would in communities that offer only basic transit service.

High quality transit requires the following features:

·     Covers a large portion of regional destinations, such as business districts, major sport and cultural facilities (arenas, theaters and conference centres), college and university campuses, and residential neighborhoods.

·     Service is relatively frequent and relatively fast (a significant portion of service is grade separated and so avoids congestion).

·     Waiting areas and vehicles are comfortable, safe, and easily accessible.

·     Attractive stations that are well integrated into neighborhoods, creating transit oriented development (compact, mixed use development around stations).

·     Affordable and convenient pricing.

·     Support and encouragement features, including good walking and cycling conditions, and efficient parking management in station areas.


Overall, residents of communities with high quality public transit tend to own 10-30% fewer vehicles and drive 10-30% less than they would in more automobile-oriented communities, as indicated in the figure below.

TOD Impacts On Vehicle Ownership and Use (Ohland and Poticha 2006)


Residents of transit-oriented developments tend to own fewer vehicles, drive less and rely more on alternative modes than in more automobile-oriented communities. "Daily VMT" indicates average daily vehicle miles traveled per capita. 


These reductions in vehicle ownership and use provide various types of consumer savings:

·     Travelers shift from driving to public transit, reducing variable costs (fuel, vehicle wear-and-tear, parking fees and tolls).

·     More accessible, compact and mixed development reduces driving distances, and allows more trips to be made by walking and cycling.

·     Improving transportation options reduces the need to chauffeur non-drivers.

·     With better transportation options, some households reduce their vehicle ownership, often avoiding the need for a second or third vehicle, and if transport options are very good, some households may give up vehicle ownership altogether.

·     Reduced vehicle ownership reduces residential parking costs, which can provide additional household savings.


Of course, actual impacts vary depending on individual household's needs and preferences. Some may not change at all, while others will reduce their automobile use and expenditures more than average. People who are physically or economically disadvantaged are particularly likely to use alternative modes and take advantage of opportunities for financial savings, proving affordability and equity benefits. Because they spend less on transportation overall and have more opportunities to save even more if faced with a financial stress (such as fuel price spikes, a vehicle failure or reduced household income), households in more accessible, multi-modal neighborhoods also tend to have lower home foreclosure rates.

According to analysis described in our new study, Raise My Taxes, Please! Evaluating Household Savings From High Quality Public Transit Service, providing high quality public transit service typically requires about $268 in annual subsidies and $108 in additional fares per capita, but reduces vehicle, parking and road costs an average of $1,040 per capita. For an average household this works out to $775 annually in additional public transit expenses and $2,350 in vehicle, parking and roadway savings, or $1,575 in overall net savings, in addition to other benefits including congestion reductions, reduced traffic accidents, pollution emission reductions, improved mobility for non-drivers, and improved public fitness and health. Physically and economically disadvantaged people tend to enjoy particularly large savings and benefits since they rely on alternative modes and are price sensitive.

Transportation investments are not usually evaluated in this way. Conventional economic evaluation compares transit investments with just roadway costs; vehicle and parking costs are generally ignored, although roadway transport requires a vehicle and parking for each trip. Other benefits, such as improved mobility for non-drivers, reductions in sprawl-related costs, and improved public fitness and health are also ignored. As a result, conventional analysis underestimates the full savings and benefits of public transit service quality improvements.

Because it provides diverse benefits, creating high quality public transportation is a win-win solution: most people benefit overall, including those who currently rely on alternative modes, those who switch from driving to alternative modes in response, and those who continue to drive  who enjoy reduced traffic and parking congestion, reduced accident risk, reduced need to chauffeur non-drivers, and various indirect savings and benefits.

Conventional public transit service is comparable to economy class airline travel; it transports people with minimal convenience, comfort or prestige. High quality public transit service is comparable to first class airline travel, which responds to affluent consumers' demands for convenience, comfort and respect. Airline travelers can choose the service quality they prefer: inexpensive basic service or more expensive higher quality service. Transit users do not usually have such options. To obtain higher quality service public transit users must convince public officials that service improvements are cost effective compared with other transport system investments, and convince citizens to support any required tax increases.

This is a timely issue. Current demographic and economic trends are increasing demand for alternative modes. Many transportation policies and planning practices that may have been justified in the past are not appropriate for the future. More comprehensive planning is needed to identify truly optimal transportation policies and projects.

When all impacts are considered, consumers have every reason to demand, Raise my taxes! to create high quality public transportation in their communities.

Todd Litman is the executive director of the Victoria Transport Policy Institute.



Excellent explanation of transit benefits -- next: the funding

I like your article, particularly the specifics on household funds saved with transit.

Now, the difficult part: the funding through taxes. There may be a variety of fair sources--sales tax, property tax, income tax. But: why not raise gas taxes? Gas prices are artificially low now because gas taxes are so low. Gas prices will rise--should all that increase go to foreign oil sellers? Instead, raising the gas taxes now can help drivers: it gets more cars off the roads so that they can enjoy their motoring lifestyle. Second, gas tax money going toward public transit supports the household savings you describe.

Gas taxes are an obvious, in-place, fair source of revenue that people have demonstrated that they are willing to pay (people still bought gasoline when the price spiked). So: why not raise gas taxes? It could be gradual, but the goal would be to see a demonstrable benefit through transit plus pedestrian amenities plus bicycling infrastructure paid for and in-place.

Todd Litman's picture

Funding Transit Improvements

Yes, it is important to develop transit funding options. Fuel taxes are a good source, since it both finances and encourages use of public transit. Fuel taxes are relatively low in many countries, insufficient to finance government expenditures on roads, and declining in value since they are not indexed to inflation. My recent research indicates that economic productivity tends to increase with higher fuel prices. For information see:

> "Fuel Taxes" (http://www.vtpi.org/tdm/tdm17.htm )

> "Financing Options" (http://www.vtpi.org/tdm/tdm119.htm )

> "International Fuel Prices 2009," Deutsche Gesellschaft für Technische Zusammenarbeit (http://www.gtz.de/en/themen/29957.htm )

> "Fun With Research: Higher Fuel Prices Increase Economic Productivity" (http://www.planetizen.com/node/42125 )

Another good option for financing public transportation is to charge more for public parking facilities and implement a special property tax on parking spaces. These also help encourage use of alternative modes and are justified on economic efficiency and equity grounds. See:

> "Parking Taxes: Evaluating Options and Impacts, (http://www.vtpi.org/parking_tax.pdf ).

> "Parking Pricing Implementation Guidelines: How More Efficient Pricing Can Help Solve Parking Problems, Increase Revenue, And Achieve Other Planning Objectives," (http://www.vtpi.org/parkpricing.pdf ).

Overall, I recommend using a diversity of funding sources to support public transportation.

Todd Alexander Litman
Victoria Transport Policy Institute
"Efficiency - Equity - Clarity"

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