Public Transit: Challenges Funding, Investing in Systems, and Coordinating Services
Published: 2014-01-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Millions of passengers use transit services on a daily basis, and many transit agencies that provide these services receive federal funding. To meet the needs of these passengers in a challenging economy, transit agencies must use federal and other resources wisely, while ensuring quality service.
The July 2012 surface transportation reauthorization act--MAP-21--has addressed a number of transit issues by strengthening federal authority to oversee transit safety and emphasizing the restoration and replacement of aging infrastructure, among other things. While it is too early to assess all of the impacts of MAP-21, the work GAO has done can help inform the next surface transportation reauthorization act.
This testimony covers GAO's recent work on: (1) funding transit; (2) improving capital decision making; and (3) coordinating services for transit-disadvantaged populations.
To address these objectives, GAO drew from its recent reports issued from March 2011 through November 2013. GAO has also analyzed MAP-21, recent rulemaking, and other reports.
section_title: What GAO Found
paragraphs: The Moving Ahead for Progress in the 21st Century Act (MAP-21) authorized $10.6 and $10.7 billion for fiscal years 2013 and 2014, respectively, for public transit, but did not address long-term funding. Federal funds available for FTA's transit programs come from the general fund of the U.S. Treasury and the Mass Transit Account of the Highway Trust Fund. The Highway Trust Fund supports surface transportation programs, including highways and transit, and is funded through motor fuel and other highway use taxes; however, revenues have eroded over time because federal fuel tax rate stagnation, fuel efficiency improvements, and the use of alternative fuel vehicles. In May 2013, the Congressional Budget Office estimated that to maintain current spending levels plus inflation between 2015 and 2022, the Fund will require over $132 billion more than it is expected to take in over that period. GAO reported that while Congress transferred over $50 billion in general revenues to the Fund since fiscal year 2008, this approach may not be sustainable given competing demands for funding. For these reasons funding surface transportation remains on GAO's High-Risk List.
To address these funding challenges, sound capital-investment decisions can help transit agencies use their funds more efficiently. GAO's work on transit asset management and bus rapid transit has illustrated these benefits.
Transit asset management : According to the Federal Transit Administration (FTA), it would cost roughly $78 billion (in 2009 dollars) to rehabilitate or replace the nation's aging transit assets--such as buses, rail cars, and escalators. GAO's 2013 report on asset management recognized that many of the nearly 700 public transit agencies struggle to maintain their bus and rail assets in a state of good repair. Sound management practices can help agencies prioritize investments to help optimize limited funding. However, of the nine transit agencies GAO visited, only two measured the effects of capital investments on asset condition and none measured the effects on future ridership. Thus, GAO recommended additional research to measure the effects of capital investments; FTA concurs in part with this recommendation. FTA agency officials recognize the importance of additional research; however, they are hesitant to commit additional resources given their current budget situation.
Bus rapid transit (BRT) : In addition to maintaining assets, transit agencies often need to build or expand systems to meet demand. Transit agencies can apply for federal capital-investment funding for new projects through New and Small Starts and Core Capacity Improvement grants. GAO's 2012 report found that many agencies had taken advantage of New and Small Starts funding to develop BRT projects, which generally require less capital investment compared to rail.
GAO's recent work also shows benefits from coordinating transit services for the transportation-disadvantaged--those who cannot provide their own transportation or face challenges accessing public transportation. GAO's 2012 report pointed out that coordination can be challenging, as federal programs provide funding for a variety of services. GAO also concluded that insufficient federal leadership and guidance on coordinating services for the disadvantaged may hinder coordination among state and local providers. The Coordinating Council--a group of federal agencies providing these services--has completed a strategic plan to strengthen interagency coordination, as GAO recommended.
section_title: What GAO Recommends
paragraphs: GAO made recommendations on these issues in previous reports. The Department of Transportation agreed to consider these recommendations and is in various stages of implementing them.

section_title: Letter
paragraphs: I am pleased to be here today to discuss our recent work on transit  issues. It is my hope that we can help inform the committee as it prepares  to develop the next surface transportation reauthorization act. Millions of  passengers use transit services on a daily basis in the United States, and  many of the local transit agencies that provide these services receive  federal funding. To meet the needs of these passengers in a challenging  economy, transit agencies must use federal and other resources wisely,  while ensuring safety and quality. The most recent surface transportation  reauthorization act, Moving Ahead for Progress in the 21st Century Act  (MAP-21), enacted on July 6, 2012, authorized funding for federal  highway and public transportation programs through September 30, 2014.  MAP-21 did not address concerns about funding for surface  transportation programs over the longer term, but it did address a number  of other areas of concern by modifying certain transit programs, at the  same time strengthening federal authority to oversee transit safety,  emphasizing the restoration and replacement of aging infrastructure,  consolidating some grants, and streamlining project development,  evaluation, and delivery. The Federal Transit Administration (FTA) is  developing guidance for implementing many of these changes. I will  highlight today our recent work that has implications for current and future  transit programs and describe how MAP-21 has affected these areas to  date.
My statement today describes our work on three main challenges: (1)  funding transit, (2) improving capital-investment decision making on  maintaining and expanding transit systems, and (3) coordinating transit  services for transit-disadvantaged populations among various federal and  state or local agencies. To the extent that these challenges can be  addressed as MAP-21 is implemented, Congress, along with transit and  federal agencies, will better be able to leverage increasingly limited  federal dollars.
For this statement, we drew primarily from our reports—including those  on funding transit, managing assets, and coordinating services for the  transportation-disadvantaged—issued from June March 2011 through  November 2013. We also analyzed MAP-21, recent rulemaking, and  other reports. The reports cited in this statement contain more detailed  explanations of the methods used to conduct our work. The work on  which this statement is based was conducted in accordance with  generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.
subsections: section_title: Long-Term Funding Challenges Remain
paragraphs: Funding for transit projects comes from public funds allocated by federal,  state, and local governments and system-generated revenues earned by  transit agencies from providing transit services. The Department of  Transportation reported: (1) that in 2008, federal funds were nearly 40  percent of total transit agency capital expenditures; (2) that state funds  provided approximately 12 percent; and (3) that local funds provided the  remaining 48 percent of total transit agency capital expenditures. Our  November 2012 report found similar funding trends. Specifically, local  funding exceeded total federal funding for the 25 projects approved for  federal New Starts grants—part of FTA’s Capital Investment Grant  Program—from October 2004 through June 2012.important part of this picture, and according to FTA, MAP-21 authorized  federal funding for public transit—$10.6 billion for fiscal year 2013 and  $10.7 billion for fiscal year 2014. However, while state and localities face  their own funding challenges, MAP-21 did not address long-term  transportation federal funding challenges.
Federal funds available for the FTA’s transit programs come from two  sources: (1) the general fund of the U.S. treasury and (2) the Mass  Transit Account of the Highway Trust Fund. Both of these sources of  federal funding face difficulties. Currently, congressional budget  discussions raise issues about general fund federal spending. This affects  transit programs, such as the Capital Investment Grant Program, which  are funded through annual appropriations from the general fund.
In addition, the Highway Trust Fund authorizes funds for transit programs  primarily through statutory formulas, and there are concerns over the  fund’s decreasing revenue. The primary mechanism for funding federal  highway and transit for more than 50 years is the Highway Trust Fund,  which is funded through motor fuel and other highway use taxes. These  taxes were established to make the federal-aid highway program self- financing—that is, paid for by the highway users who directly benefit from  the program. For many years, user fees in the form of federal fuel taxes  and taxes on commercial trucks provided sufficient revenues to the  Highway Trust Fund; however, revenues into the fund have eroded over  time, in part because federal fuel tax rates have not increased since 1993  and in part because of improvements in vehicle fuel efficiency. In May  2013, the Congressional Budget Office estimated that to maintain current  spending levels plus inflation between 2015 and 2022, the Highway Trust  Fund will require over $132 billion more than it is expected to take in over  that period. About $35 billion of that deficit would be in the transit account.  To maintain current spending levels and cover revenue shortfalls,  Congress has transferred more than $50 billion in general revenues to the  Highway Trust Fund since fiscal year 2008. This approach has effectively  broken the link between taxes paid and benefits received by users and  may not be sustainable given competing demands and the federal  government’s growing fiscal challenge. As we have previously reported,  this trend will continue in the years ahead as more fuel efficient and  alternative fuel vehicles take to the roads. We have previously concluded  that a sustainable solution to funding surface transportation is based on  balancing revenues to and spending from the Highway Trust Fund.  Ultimately, major changes in transportation revenues, spending, or both  will be needed to bring the two into balance. For this and other reasons,  and because MAP-21 did not address these issues, funding surface  transportation remains on GAO’s High-Risk List.
section_title: Effective Capital- Investment Decisions Help Transit Agencies Use Funds More Efficiently
paragraphs: Our recent work describes how sound capital-investment decisions can  help transit agencies use federal and other transit funds more efficiently,  and MAP-21’s new requirements for transit agencies to use asset  management are consistent with our recent findings.
subsections: section_title: Transit Asset Management
paragraphs: Improved transit asset management is important because of (1) the large  backlog of transit assets—such as buses, rail cars, elevators, and  escalators—that are already beyond their useful lives; (2) increasing  demand for transit services; and (3) financial strains on transit providers  due to rising fuel prices, decreased state and local funding, and likely  limitations of federal funding going forward. According to FTA, roughly  $78 billion (in 2009 dollars) would be necessary to cover the costs of  rehabilitating or replacing the nation’s transit assets and bring them to a  state of good repair. Sound asset-management practices can help  agencies prioritize their capital investments to help optimize limited  funding.
We reviewed agencies by conducting site visits and interviews, examining documents,  and consulting relevant literature. We selected agencies for review in two ways: 1) using a  selection process for transit-agency site visits, and 2) reviewing transit agency case  studies included in two key reports we identified through a comprehensive literature  review. decisions. Transit agencies that measure and quantify the effects of their  capital-investment decisions are likely to make a stronger case for  additional funding from state and local decision-makers. However, of the  nine transit agencies we visited, only two measured the effects of capital  investments on the condition of certain transit assets and none of the  agencies measured the effects on future ridership, in part because they  lacked the tools to determine these effects. Figure 1 below shows the  extent to which selected transit agencies measured the effect of capital  investments.
Accordingly, we recommended that the Administrator of FTA conduct  additional research to help transit agencies measure the effects of capital  investments, including future ridership effects. The FTA concurs with this  recommendation, in part. FTA agrees that more research to identify the  operational impacts of not addressing the state of good repair backlog will  support better asset management by transit agencies. However,  according to FTA officials, given the agency’s current budget situation, it  is difficult for it to commit to conduct additional research in the near future.  FTA has almost $10 million in research projects on transit asset  management underway.
MAP-21 directed FTA to provide transit agencies with tools and guidance  they need to help them better prioritize capital investment decisions.  MAP-21 also directed FTA to develop asset management requirements  for all recipients of federal transit program funds, including a transit asset  management plan, which must include at a minimum, capital asset  inventories, condition assessments, and investment priorities. Since the  enactment of MAP-21, FTA has been developing guidance to help transit  agencies implement leading practices in transit asset management and a  decision support tool to prioritize investments. FTA also issued an  advance notice of proposed rulemaking (ANPRM) in October 2013 and  requested that comments be submitted to them by January 2, 2014. The  ANPRM states that FTA is seeking to ensure public transportation  systems are in a state of good repair and transit agencies provide  increased transparency into their budgetary decision-making process.  FTA is seeking public comment on, among other things, (1) proposals it is  considering and (2) questions regarding the following:  the requirements of a National Transit Asset Management System,  including four options for defining and measuring state of good repair,  and  the relationship between safety, transit asset management, and state  of good repair.
As FTA completes its analysis of these comments and further develops a  National Transit Asset Management System, transit agencies may be  better equipped to implement current leading practices in transit asset  management and comply with future transit asset management  requirements envisioned by MAP-21.
section_title: Bus Rapid Transit
paragraphs: In addition to maintaining transit agencies’ existing assets in a state of  good repair, some transit agencies also face a need to build and expand  their systems to meet demand. To meet these needs in a financially  constrained environment, transit agencies can apply for capital funding  available from the federal government through the Capital Investment  Grant Program, which includes New and Small Starts grants. In many  cases, transit agencies have taken advantage of this federal funding to  develop bus rapid transit (BRT) projects, which often require less capital  investment than other transit modes. For example, New York  implemented a BRT project for the M15 line. This BRT line provides  critical transportation service in Manhattan for over 55,000 riders a day,  connecting many neighborhoods that are a long walk from the nearest  subway station. Thus transit agencies are able to meet transit demand  with BRT projects with a lower initial capital investment than other modes  of transit, like heavy rail. Specifically, we found in our 2012 report that  median costs for the 30 BRT and 25 rail transit projects we examined  from fiscal year 2005 through February 2012 were about $36.1 million  and $575.7 million, respectively.
Pub. L. No. 109-59, 119 Stat. 1144 (Aug. 10, 2005). projects. According to all of the five BRT project sponsors we spoke with  during our work, even at a lower capital cost, BRT could provide rail-like  benefits. For example, Cleveland RTA officials told us the Healthline BRT  project cost roughly one-third ($200 million) of what a comparable light- rail project would have cost. Similarly, Eugene, Oregon, Lane Transit  District (LTD) officials told us that the agency pursued BRT when it  became apparent that light rail was unaffordable and that an LTD light rail  project would not be competitive in the New Starts federal grant process.  In terms of benefits, these projects—and most other BRT project we  examined—increased ridership and improved travel times over the  previous bus service. As a result of the lower initial capital costs for BRT  along with the benefits of improved service, transit agencies took  advantage of federal New and Small Starts dollars to invest in a relatively  large number of BRT projects, as compared to other modes of transit.  (See fig. 2).
In addition, we found that although many factors contribute to economic  development, most local officials in the five case study locations we  visited believed that BRT projects were contributing to localized economic  development. For instance, officials in Cleveland told us that an estimated  $4 to $5 billion had been invested near the Healthline BRT project— associated with major hospitals and universities in the corridor. While  most local officials believed that rail transit had a greater economic  development potential than BRT, they agreed that certain factors can  enhance BRT’s ability to contribute to economic development, including  physical BRT features that relay a sense of permanence to developers;  key employment and activity centers located along the corridor; and local  policies and incentives that encourage transit-oriented development. Our  analysis of land value changes near BRT lines at our five case study  locations lends support to these themes.
MAP-21 included a few changes that affected BRT. For example, MAP-21  defined BRT more narrowly and specifically than SAFETEA-LU.  Specifically, MAP-21 required that BRT projects include features that  emulate the services provided by rail, including defined stations rather  than bus stops. This is consistent with our work, as we found that  including rail-like features appears to lead to increased economic  development along BRT corridors. In addition, MAP-21 made a distinction  between BRT projects that are eligible for New Starts versus Small Starts  funding.
section_title: Coordination Efforts for Transportation- Disadvantaged Populations Are Under Way
paragraphs: Effective federal coordination can help maximize limited resources, while  still providing essential services—especially to transportation- disadvantaged populations, including those who cannot provide their own  transportation or may face challenges in accessing public transportation  due to age, disability, or income constraints. We have previously reported  that transportation-disadvantaged populations often benefit from greater  and higher quality services when transportation providers coordinate their  operations. Additionally, as we reported in our findings on duplicative  efforts and programs, improved coordination of these programs and  transportation services has the potential to improve the quality and cost- effectiveness of these services, while also reducing duplication, overlap,  and fragmentation of services.
However, effective coordination can be challenging, as federal programs  provide funding under a variety of services, including education,  employment, and medical and other human services. Our 2012 report on  transportation-disadvantaged populations found that 80 federal programs  in eight different agencies fund a variety of transportation services. While  some federally funded programs are transportation focused,  transportation was not the primary mission for the vast majority of the  programs we identified. For example, the Department of Health and  Human Services’ Medicaid program reimburses states that provide  Medicaid beneficiaries with bus passes, among other transportation  options, to access eligible medical services. Total federal spending on  services for transportation-disadvantaged populations remains unknown  because federal departments did not separately track spending for  roughly two-thirds of the programs we identified.
Our June 2012 report also concluded that insufficient federal leadership  and lack of guidance for furthering collaborative efforts might hinder the  coordination of transportation services among state and local providers.  Officials in each of the five states we selected for interviews said that the  federal government could provide state and local entities with improved  guidance on transportation coordination—especially related to  instructions on how to share costs across programs (i.e., determining  what portion of a trip should be paid by whom). To promote and enhance  federal, state, and local coordination efforts, we recommended in 2012  that the Secretary of Transportation, as the chair of the Interagency  Coordinating Council on Access and Mobility (Coordinating Council),  along with the Coordinating Council’s member agencies, should meet and  complete and publish a strategic plan outlining agency roles and  responsibilities and articulate a strategy to help strengthen interagency  collaboration and communication. Also, the Coordinating Council should  report on the progress of its prior recommendations and develop a plan to  address any outstanding recommendations. DOT agreed to consider our  recommendation and the Coordinating Council’s member agencies  responded by issuing a strategic plan for 2011–2013, which established  agency roles and responsibilities and identified a shared strategy to  reinforce cooperation, and officials have indicated they will continue to  take steps to implement our recommendations.
FTA has made some progress in enhancing coordination for  transportation-disadvantaged populations. According to FTA officials, as a  result of MAP-21, the agency has been updating program guidance and  has issued draft program circulars for its Urbanized Area Formula  Program, Enhanced Mobility for Seniors and Individuals with Disabilities  Program, and the Rural Areas Formula Program, all of which discuss  coordinated transit programs, among other issues. In addition, FTA  continues to support federal programs that play an important role in  helping transportation-disadvantaged populations by providing funds to  state and local grantees that, in turn, offer services either directly or  through private or public transportation providers. Further, some FTA  programs require or encourage their grantees to coordinate transportation  services. For example, FTA’s Enhanced Mobility of Seniors and  Individuals with Disabilities program—which provides formula funding to  states to serve the special needs of transit-dependent populations beyond  traditional public-transportation service—requires grantees to coordinate  their transportation services and establish locally developed, coordinated  public transit-human services transportation plans. We continue to  examine these funding, service delivery, and coordination issues.
Chairman Johnson, Ranking Member Crapo, and Members of the  Committee, this completes my prepared statement. I would be pleased to  respond to any questions that you may have at this time.
section_title: GAO Contacts and Acknowledgments
paragraphs: If you or your staff have any questions about this testimony, please  contact me at (202) 512-2834 or wised@gao.gov. Contact points for our  offices of Congressional Relations and Public Affairs may be found on the  last page of this statement. In addition, to the contact named above,  Cathy Colwell, Geoffrey Hamilton, Hannah Laufe, Sara Ann Moessbauer,  Tina Paek, Stephanie Purcell, and Amy Rosewarne made key  contributions to this statement.
section_title: Related GAO Products
paragraphs: Transportation-Disadvantaged Populations: Coordination Efforts are  Underway, but Challenges Continue. GAO-14-154T. Washington, D.C.:  November 6, 2013.
Transit Asset Management: Additional Research on Capital Investment  Effects Could Help Transit Agencies Optimize Funding. Washington,  D.C.: July 11, 2013.
High-Risk Series: An Update. GAO-13-283. Washington, D.C.: February  2013.
ADA Paratransit Services: Demand Has Increased, but Little is Known  about Compliance. GAO-13-17. Washington, D.C.: November 15, 2012.
Public Transit: Funding for New Starts and Small Starts Projects, October  2004 through June 2012. GAO-13-40. Washington, D.C.: November 14,  2012.
Bus Rapid Transit: Projects Improve Transit Service and Can Contribute  to Economic Development. GAO-12-811. Washington, D.C.: July 25,  2012.
Transportation-Disadvantaged Populations: Federal Coordination Efforts  Could Be Further Strengthened. GAO-12-647. Washington, D.C.: June  20, 2012.
Government Operations: Opportunities to Reduce Potential Duplication in  Government Programs, Save Tax Dollars, and Enhance Revenue.  GAO-11-318SP. Washington, D.C.: March 1, 2011.
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