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These transit agencies, once considered the backbone of metropolitan economies and moving a large number of passengers to and from work, are now running virtually empty with no real solution in sight for the foreseeable future. Although the recent news about a COVID-19 vaccine provided a glimmer of hope for many local and state economies, transportation agencies still have a long way to go before reaching their pre-pandemic ridership numbers and getting back to some state of normalcy. Furthermore, given the vital role transportation agencies play in metropolitan mobility, shutting down isn’t an option for any of them.
In this article, we will take a closer look at the current challenges for American transportation agencies and what the future holds.
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All large transit agencies rely heavily on passenger fares to pay for their operating costs. In the beginning of the second quarter of 2020, all transportation agencies across the United States started seeing some historic declines in daily ridership numbers, resulting in severe impairment of their revenues. In a recent publication by the Rockefeller Institute of Government, ridership declines are unanimous throughout the United States.
Here are some startling figures on these historic declines:
For some transportation agencies, local sales tax revenues also contribute to overall operations of transit agencies, another revenue stream that has been impaired due to COVID-19.
Be sure to check out this article where we explore how U.S. transportation agencies are bracing for the worst.
The inevitable reality of the future can be seen in a survey conducted by IBM of 25,000 US residents and published by Rockefeller Institute of Government. It states “more than 20 percent of regular transit riders said they wouldn’t ride anymore. Another 28 percent said they planned to use public transit less often.”
So, it’s imperative for public transportation leaders to think both short and long term in the current environment. The short-term strategic thinking is relevant to bridging the revenue versus expenditure gap from now until the return of ridership. This means the need to either raise liquidity from capital markets or cut expenditures. Long-term strategic thinking includes seeking additional revenue sources like introducing a dedicated local sales tax measure to fund the operations.
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As mobility expert David Zipper, a visiting fellow at the Harvard Kennedy School’s Taubman Center for State and Local Government, stated, “It’s not a question of will riders come back or when will they feel comfortable. It’s more a question of, how do we ensure that transit can provide the lifeblood that the biggest cities in America rely upon?”
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Disclaimer: The opinions and statements expressed in this article are for informational purposes only and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned. Opinions and statements expressed reflect only the view or judgement of the author(s) at the time of publication and are subject to change without notice. Information has been derived from sources deemed to be reliable, the reliability of which is not guaranteed. Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professionals and advisers prior to making any investment decisions.