Developing a Local Free Market Transportation Policy

In my previous blog post we examined how to create a national free-market transportation policy. This posting will examine how to create a similar policy on the local level. Unlike the federal and state levels, the make-up of local government varies by location. While major cities, close-in suburbs, and some small towns tend to be under Democratic rule, other suburbs, exurbs and the remainder of small towns tend to be under Republican rule. While Republicans are most likely to adopt free market reforms, moderate Democrats can be convinced to adopt such reforms as well.

Municipalities should focus on funding local assets. A local asset is any transportation infrastructure that serves residents of a city or region. For highways, cities should focus on funding minor arterials and local streets. Regional governments may still fund some freeway and major arterials if these systems move people throughout the region. For passenger railroads and airports, governments may provide some funding if the assets serve a major regional purpose, but such systems are better funded at the national and state level. While freight rail is better funded at the national or state level, regional coordination is important. Local governments are the best units to fund transit systems, although governments should insist on a farebox recovery rate of 50% and a professionally-operated system. Local governments are the best unit to fund bicycling and walking. However, governments should spend transportation resources on bicycling and walking used for transportation purposes not recreational purposes. Recreational uses should be funded by the park/general budget.

How should such a system be funded? We detailed the user-pay/user-benefit argument for highways, aviation and freight rail in the national post and the principle of mileage based user fees (MBUF) in the local post. Transit is best funded by a combination of farebox revenue, value capture and sponsorships. These funding mechanisms typically struggle to provide half of the funds for transit, often because service is priced too low. A better option is charging the full market rate for transit service and offering vouchers for low-income riders. Well-operated transit systems should be able to receive a minimum of 50% of operating expenses from tickets, value-capture and sponsorships. Bicycling and walking are the most challenging modes to fund. Ideally, a city will enact some form of small charge for bicyclists such as a tire fee. While such a sum raises only a small amount of funds it retains the user-pay/user-benefit principal. Using general funds on non-motorized transport may be necessary and is acceptable as long as significant numbers of commuters bike or walk.

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