Toward a Financially Sustainable Public Transportation Systems – The Effects of the Type of Service on Cost Efficiency.
Auguin, Corentin Tristan
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The extensive Eisenhower era highway system is reaching the end of its lifespan and will require a large investment in the coming years to keep functioning. History as shown that this extensive highway system is not solving the accessibility problems of our modern cities. Public transportation is making a resurgence as a potential solution. However, with little political willingness to downsize the system most of the Highway Trust Fund revenues are going toward the highway account, leaving public transportation systems with little money to expand. For the public transportation to strive, it either requires extra funding or it needs to be more efficient. This paper examines the correlation between transit system privatization and efficiency. The paper uses a series of regressions to determine if the efficiency, measured by the ratio of total operating expenses by vehicle revenue hour, is affected by the type of service (Directly operated, purchased transportation or mixed). The methodology is an update of McCullough’s (1998) as it uses 2009 to 2013 data and introduces a variable to control for competition in the market. The results show that purchased transportation seemed to be associated with greater efficiency of the systems. Competition in the market is also significant and might be the real explanation behind purchase transportation being meaningful. However, when looking at the financial impact, the real driver of efficiency is scheduling.