Sunday, April 02, 2023

METRO subsidizes riders higher than the cost of car ownership!

Today we have an excellent analytical guest post with some fantastic charts from Oscar Slotboom.
Metro's 2022 annual report recently was posted online. Last year's report (2021) was the first annual report fully affected by Covid (blog post), with ridership down 50% compared to 2019 and the rider boarding subsidy increasing from $10.01 in 2019 to $18.37 in 2021 (in 2022 dollars).
2022 is the first year in the ridership recovery, which has been slow and is likely to continue incrementally for many years. 2022 ridership was down 36.3% compared to 2019, and the improved ridership lowered the boarding subsidy to $15.10.
This first plot shows Metro's operating budget and ridership. Ridership first exceeded 100 million in 1999 at 101 million boardings, and Metro's all-time peak was 103 million in 2006. Ridership dropped to 81 million boardings in 2010 due to the Great Recession, and the slow recovery increased ridership to 90 million in 2019, the year before Covid. Metro's 2022 $904 million operating expense resumed an upward trend after two years of declines, but the 2022 expense remained below inflation-adjusted values for 2016 through 2020.
The next plot shows the taxpayer subsidy per boarding, determined by dividing the operating loss ($864.6 million in 2022) by the number of boardings (57.26 million in 2022). The 2022 subsidy was $15.10 per boarding, down 18% from the 2021 inflation-adjusted value of $18.37. The more concerning feature of this plot is the steady rise in boarding subsidies before Covid, up 117% (in 2022 dollars) from $4.62 in 2001 to $10.01 in 2019.
We'll probably see some continued improvement in the boarding subsidy, but the slow ridership recovery and increasing Metro budget means it will likely never get back to the pre-Covid value, or even within 25% of the pre-Covid value.
Metro's approved 2023 budget has an $855 million operating budget (page 41) which is suspicious because the 2022 operating expense was $903.5 million and operating loss was $864.6 million. Cost-cutting or more efficient operation would be welcome, but I'll believe it when I see it. Also, the 2022 operating budget was $740.5 million (page 41) but the actual expense was $903.5 million.
A Metro customer making a round trip is two boardings, so the trip subsidy is $30.20. A regular Metro customer making 250 round trips per year will have 250 x $30.20 = $7,550 total subsidy per year. Using AAA data for 2022, the subsidy is higher than the cost to own and operate a small sedan for 10,000 miles, and is about equal to the cost for driving a small sedan 12,000 miles per year. So every regular Metro customer is costing taxpayers the cost of annual car ownership.
This chart shows components of Metro budgets since 2001 (in 2022 dollars). The 2022 budget dropped back to historical levels after the ridiculously large Covid operating grants in 2020 and 2021. Of course, the excessive grants to Metro and transit agencies nationwide was piled onto the $31.4 trillion national debt.
Metro has a longstanding policy of dedicating a percentage of sales tax revenue (originally 25%) to "infrastructure assistance", which is funding for non-transit projects like streets and also includes grants to member cities. The gray line in the plot (2022 dollars) shows the steady increase in sales tax revenue to a new record high of $970 million in 2022, while the green line shows that infrastructure assistance has been flat and was $195 million in 2022, 20% of sales tax revenue. The steadily increasing gap between sales tax and infrastructure assistance appears to be going to boarding subsidies.
Tory has mentioned Metro's low farebox recovery in blog posts. There was a slight improvement in 2022, with the average fare collected increasing from $0.64 in 2021 to $0.68, and fares covering 4.3% of the rider cost in 2022 compared to the all-time low of 3.4% in 2021.

In Part 2, we'll take a closer look at Metro's marketing expense and the most recent ridership data.



At 3:08 PM, April 04, 2023, Blogger VeracityID said...

I ran the same analysis a decade ago for St. Louis' transit agency: same result. The best thing we could do is to legalize jitneys and get rid of everything else. Perhaps with some sort of low income subsidy. Bill

At 11:33 AM, April 09, 2023, Blogger Michael Bloom said...


Could you compare METRO to the DC system or the London mass transit system? Could your analysis consider the value of social, economic, and environmental benefits realized by providing subsidized and affordable mass transit? Things like affordable access to jobs and education, less air pollution, etc.

Isn't the main objective of public mass transit systems to realize greater monetized social, economic, and environmental benefits than the invested public subsidy? Don't European systems and other higher use North American systems receive subsidies?

It seems like this analysis omits consideration of those benefits.

Michael Bloom

At 7:49 PM, April 09, 2023, Blogger Tory Gattis said...

As I articulated in my TEDx Talk, transit makes much more sense in old pre-car cities that have the density and walkability to support it. Houston is not one of those cities. We do need a publicly subsidized basic bus transit system for the small portion of the population that needs it. But I think trying to attract discretionary riders is mostly wasted money. Huge sums have been spent building the Green, Purple, and Silver lines with very few riders. Those routes could have been served just as well with buses while saving billions.

At 8:21 PM, April 09, 2023, Blogger Max Concrete said...

@Michael Bloom: This post was not an attempt to do a comprehensive social-economic-environmental analysis. The objective of this post is to present ridership and financial facts as reported in official Metro documents, and to make readers aware of the performance of Metro, specifically declining ridership and the high cost of providing service.


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