Actually, Federal funding of bikeshare does make sense

Since the Washington Post has seen fit to re-run a modified version of the Heritage Society's blog post about the Bikeshare Transit Act - one that is specifically critical of Capital Bikeshare, I decided to write a more formal response to it than the last one. 

It's not easy, because the thesis isn't clearly stated until the end, the text above that doesn't really support the thesis and what is written contradicts other points within the rambling attack. In addition many relevant facts are excluded or disguised. Nonetheless, I'll give it a go.

Michael Sargent is writing to oppose the proposed Bikeshare Transit Act, which would explicitly allow the federal funding of bikeshare, something that is already going on. He does so because he believes "it is in the clear interest of taxpayers everywhere — and the systems themselves — to keep the funding of bikeshares a local matter."

He doesn't really lay out a compelling case for this "clear interest" however. 

First, let's talk about what the law does, which requires me to get a bit wonky. It does three things 

1. It makes bikesharing projects eligible for "associated transit improvement" (ATI) funding, but this does not include operating expenses. The ATI program requires recipients of Urbanized Area Formula Grants in large urbanized areas (>200,000 in population) to spend at least 1% of their Federal transit funds on associated transit improvements which include several options like historic preservation of old train stations, walkways, trash cans, signage and even even bicycle access, including bicycle storage facilities and installing equipment for transporting bicycles on public transportation vehicles. Urbanized area formula grants (UAFG) constitute about $4.4 billion of the Mass Transit Account from the Highway Trust Fund. So we're talking about only 1% of a portion of that $4.8 billion (to large cities) and then only if that recipient chooses to fund bikesharing instead of something else. 
2. It makes bikesharing a "Capital Project" eligible for UAFG money on its own. Here again it does not fund operating expenses, but rather "the acquisition or replacement of bicycles and related equipment, including technology and vehicles needed to restock stations, and the construction of bicycle-related facilities to facilitate a bikeshare project.”
3. It makes bikesharing eligible for "Congestion Mitigation and Air Quality" (CMAQ) funding if it "shifts traffic demand to nonpeak hours or other transportation modes, increases vehicle occupancy rates, or otherwise reduces demand for roads." Unlike the previous two, CMAQ funding comes out of the "Highway Account", not the "Mass Transit Account" of the Highway Trust Fund.

Sargent does not express objection to any of these programs. He does not call in to question the wisdom of CMAQ or ATI or gasoline taxes or even the Mass Transit account. It is only the addition of bikesharing as eligible for these programs that he is objecting to. But his reasons for objecting don't really make sense and don't have much of anything to do with federal funding. He doesn't explain why bikesharing doesn't fit in these programs. He doesn't even try.

Sargent lists four reasons why keeping the funding of bikeshares a local matter is in the interest of taxpayers everywhere.

The tax dollars sent to bikeshares would come from gas taxes - Not entirely. Gasoline taxes make up the bulk of the Highway Trust Fund, but other taxes include taxes on tires, truck and trailer sales, large vehicle use and fines and penalties imposed for violation of motor carrier safety requirements. In addition, as Sargent well knows, even these taxes are inadequate to cover the needs and so about $80 billion over the next 6 years would come from other non-gas tax sources. So bikeshares would not be dependent on gas guzzlers since Congress has signaled repeated willingness to fill any shortages with general tax revenue.

Nonetheless, it's unclear why this makes funding bikeshare locally better than doing it federally. We fund many programs meant to reduce gasoline use and driving with "gas tax money." In fact, that's the whole point of the CMAQ program. It's called a pigouvian tax. Would a local gas tax solve this "problem." This is an argument against funding it with gas taxes, and one that, itself, doesn't make much sense.

Capital bikeshare is an amenity, not a cost-effective means of transportation - That it's a means of transportation is inherent and for users it is certainly cost-effective, or else why are they using it? For government, as he notes, it has a recovery ratio of 70% (expected to go up to 77% in 2016 due to increased fees), higher than both Metrobus (24%) and Metrorail (67%).

While I would certainly expect the Heritage Society to oppose all transit funding and think that its all a dud if it can't pay its own way, he praises such funding for buses: "wouldn’t federal money be better spent improving mobility for low-income Americans, who overwhelmingly rely on cars and buses to get to work?" So if cost-effectiveness is relevant, it would seem misplaced to favor buses over bikesharing.

But most damning is that Sargent only considers operating costs and revenue to determine cost-effectiveness, like it's a business. But it's a government service, and as such other benefits come in to play. MWCOG determined back in 2010 that bikeshare

delivers significant and far-reaching benefits, such as increasing bicycle ridership region-wide, increasing transit accessibility, offering the most affordable transit service, improving public health, reducing emissions of air pollutants, increasing safety for all cyclists, and supporting economic development. These benefits far outweigh the capital and operating costs at a benefit-cost ratio of 1.74 using a 7% discount rate.

That seems to make it cost-effective.

But even if those projections are wildly optimistic, it's again unclear how turning the funding of this over to local government solves this problem.  

[Note that Sargent doesn't actually say CaBi isn't cost-effective, he only questions if it is.]

Capital Bikeshare loses money, and a free stream of federal money unlinked to local performance would not give bikeshares the incentive to minimize operating costs or expand responsibly. - For starters, the money isn't free. ATI money requires a 5% local match, and Capital Projects and CMAQ require a 20% match. 

And it's not unlinked to local performance in all cases. CMAQ projects, for example, have to report their results to the Secretary of Transportation where they are assessed for cost-effectiveness. 

But at least this finally hits on the thesis about how local funding is better - incentives.

Of course, this could be said of pretty much everything funded by the Highway Trust Fund. Transit, bikeshare, trash cans, highways, ferries - they all lose money.

Q:How are they being incentivized to minimize operating costs or expand responsibly?

A: The same way bikeshare is - through local matches and the fact that federal money spent on this comes out of a block grant. If not spent on bikeshare, it could be spent on something else in the area. So bikeshare has to compete with other eligible projects. There's your incentive.

Capital Bikeshare members are wealthy, spending federal money improving mobility for low-income Americans would be better - According to a self-reported survey of CaBi members, they are wealthier than the average Washingtonian (though, the poorest members are the least likely to have participated in the survey), but the rest is not necessarily a given. If the cost of subsidizing bikeshare is exceeded by the benefits of it, and it does so by more than other options, then spending money on it is better. Sargent offers no evidence that this isn't the case. He doesn't attempt to quantify the  benefit of providing mobility to low-income Americans as opposed to others (and I concede that there surely is a benefit). In fact, he never discusses the benefits of bikeshare at all.

If he did, one benefit he'd have to mention is that it DOES improve mobility for low-income Americans, it just isn't used by them as much. It is, nonetheless, used by some low-income residents. In addition, to the extent that it reduces congestion on other transit modes (or on roads that buses use), it aids those who continue to use buses and trains.

If the MWCOG analysis doesn't hold now that we have actual data on uses and costs, or if other options can do better, then we should look at funding those other options instead. Though really, we should fund those options and fund bikeshare (if the benefit-cost ratio is still greater than 1). 

And, to repeat a theme, even if this were true, this is not an argument that it is in the interest of taxpayers to keep funding a local matter. This is an argument against publicly funding bike share at all. Funding it locally doesn't make it benefit low-income Americans any more.

If he doesn't think taxpayer money should go to bikeshare at all - and that it should be forced to break even like a business - something he hints at near the end, he should say that. Of course, I'd point him to the MWCOG analysis and ask why clean air, better health, increased safety etc... aren't things government should be trying to provide.

Sargent's article on the Heritage website last month was terrible, and it hasn't improved much (at least he got the solar power thing right) over the last month. So it's disappointing to see the Post run it.

Comments

[SJE]

Roads don't make money, and are clearly an amenity, but we fund them too.

[SJE]

As for CABI users wealth: We could charge more, but why single out CABI? CABI is a transportation program like roads and bridges, and all those highways favor the wealthy in the burbs over the poor in DC. Yet we don't toll most bridges and roads.

As for cost: the Wilson Bridge cost 2.5B. The REPAIRS to Arlington memorial bridge are estimated at $250M. Bike share is a rounding error.

For Heritage, this is more of a cultural issue than economics

[Crickey7]

Nothing else works like Bikeshare, so comparisons fail. It's for short trips in the areas of the city where adding most cars on the road and associated car storage is most problematic. It's added capacity right where you most want it, and cheap at the cost.

[Bayley Vanderpoel]

He'll never respond to how significantly roads are subsidized out of general government funds. That's not true fiscal conservatism. That's hypocrisy. I can't take republicans seriously. Despite to grossly bloated military spending due in large part to bloated useless contracts like for the F35, they still want to get on their soap box and talk about government waste like bikeshare.