Local and Suburban Transit

SIC 4111

Companies in this industry

Industry report:

This industry consists of establishments primarily engaged in furnishing local and suburban mass passenger transportation over regular routes and on regular schedules, with operations confined principally to a municipality, contiguous municipalities, or a municipality and its suburban areas. Also included in this industry are establishments primarily engaged in furnishing passenger transportation by automobile, bus, or rail to, from, or between airports or rail terminals, over regular routes, and those providing bus and rail commuter services.

Industry Snapshot

According to the Public Transportation Fact Book, public transportation was a $54.2 billion industry in 2008 employing 387,155 workers, up compared to $43 billion in 2005. Of the $54.2 billion, $36.4 billion went towards operating expenses and another $7.8 billion went on capital investments. Throughout 2008 total ridership reached an estimated 10.5 billion passengers, the largest passenger count since 1956. Bus ridership comprised 5.6 billion, while rail ridership constituted $3.5 billion.

Despite America's complaints about traffic, pollution, gasoline prices, and lack of available parking, the truth is that Americans love their automobiles. However, as highway congestion continues to increase, improving and expanding mass transit systems remains on the agendas of most major metropolitan areas. By the 2000s, Americans were spending three times as many hours idling in traffic as they did in 1982. According to a 2004 study by the Texas Transportation Institute, the total annual cost of wasted fuel and wage hours from time spent idling in traffic in 85 urban areas surveyed was more than $63 billion in 2002.

In 2005, 9.8 billion passengers used public transportation in the United States, with approximately 34 million riders on an average weekday. About 59 percent of riders used public transportation to travel to and from work. According to American Public Transportation Association, the mass transit industry generated more than $43 billion annually and employed some 366,000 people in 2005.

Despite the obvious advantages to an expansive public transportation system, including time and fuel savings, the nation's mass transit system has struggled under tight city budgets and lower than desired ridership numbers. Although survey studies have shown that people say they would use public transportation if it was convenient, one-fourth of the population has no access to public transportation and one-half of the population has only limited access.

Organization and Structure

Passenger transit is considered an essential public service in the United States. As such, large sums of government financial assistance are pumped into transit systems throughout the country every year. Since World War II, private transit companies have been converted into public enterprises on a huge scale. This trend was facilitated by the passage of the Urban Mass Transit Act of 1964. This act was created largely as a measure to save mass transit from disappearing, since the postwar rise in automobile use had pushed many transit companies into insolvency. By 1990, public transit systems accounted for 86 percent of the industry's vehicles, 94 percent of its vehicle miles operated, and 94 percent of its unlinked passenger trips.

Transit Modes.
Local and suburban passenger transit included several different transportation modes. The most common mode found in the United States was the motorbus, which saw heavy use throughout the country. In large cities, heavy rail systems, which generally means subways and elevated rails, were also common. Commuter trains, light rails, and trolleys were also part of the local transit network. This industry also included vanpools, airport shuttles, and other transportation to transit terminals, provided they ran over regular routes on fixed schedules.

Obviously, the need for transit grows with population size. In general, smaller urban areas use more buses and vanpools. More than half of the nation's road transit systems are located in urbanized areas with populations under 50,000. Rail systems exist in more than 50 metropolitan areas.

The American Public Transportation Association (APTA) is an organization of mass transit operators in the United States and Canada. Based in Washington, the APTA has more than 1,000 members. The APTA is generally considered the definitive source of transit information in the United States. Its members include organizations involved in every facet of mass transit, including construction, design, financing, planning, and supplying. The APTA was created in 1974 with the merger of the American Transit Association (ATA), founded in 1882 as the American Electric Railway Association, and the Institute for Rapid Transit (IRT). The federal agency that oversees the industry is the Federal Transit Administration (FTA, formerly known as the Urban Mass Transit Administration), an arm of the U.S. Department of Transportation.

Background and Development

Urban mass transit in the United States began to appear in the early part of the nineteenth century. In 1827, a horse-drawn stagecoach line began operating in Manhattan. Designed and planned by Abraham Brower, the line started out as a single 12-passenger vehicle, built by the coach-making company Wade & Leverich, running up and down Broadway. Two years later, Ephraim Dodge followed suit in Boston. Meanwhile, a more comfortable vehicle called an omnibus was gaining popularity on the streets of London and Paris. Brower took notice of the omnibus' success in Europe and, within four years of their New York introduction, more than 100 omnibuses were rolling on New York's grid of streets. By 1844, omnibus service was also available in Philadelphia, Boston, and Baltimore.

Beginnings of Rail Service.
At the same time that road transit was developing in the United States, street railway lines were making their debut. In 1832 John Mason, president of the Chemical Bank, founded the New York and Harlem Railroad, which initially ran along the Bowery from Prince Street to 14th Street, and eventually stretched all the way to Harlem. New Orleans launched a similar streetcar line in 1835, but this mode of transit did not really catch on until the 1850s, when Brooklyn, Cambridge, Philadelphia, Baltimore, Pittsburgh, Cincinnati, and Chicago all had horse-drawn rail lines built.

By 1882, more than 400 street railway companies were in business in the United States, with a total capital investment of $150 million. Those companies operated 18,000 streetcars and owned 100,000 horses or mules. Approximately 1.2 billion passengers were riding in railcars annually. That year, the American Street Railway Association was formed in Boston as a nationwide trade organization.

The first successful cable-powered transit line began operating in San Francisco in 1873. Cable cars spread across the country more quickly than horse cars had, and by 1883, cable lines were operating in Chicago, Philadelphia, and New York. The New York line included a route across the newly built Brooklyn Bridge. More than nine million passengers rode cable cars across the bridge in the cable line's first year of operation. In 1888, the first successful electric-powered street railway line was launched in Richmond, Virginia. Powered by a small, stationary copper wire, this line quickly made cable cars--with their cumbersome systems of pulleys, wheels, and underground vaults--obsolete.

The next major development in urban transit was the elevated rail. Although elevated lines had popped up in New York throughout the second half of the nineteenth century, it was not until financier Jay Gould took them over and combined them into a single entity, the Manhattan Railway, that the "els" became an important transit system. By 1893, the New York els carried 500,000 passengers a day. Steam-powered elevated lines also appeared before the turn of the century in Kansas City, Missouri and Sioux City, Iowa, but these ventures were short-lived. The Chicago "L" opened in 1892, and it was there that the first electric-powered elevated rail was unveiled in 1895.

Ground was broken in 1900 for the nation's first subway system, New York's Interborough Rapid Transit (IRT). On the system's first day of operation in October of 1904, 150,000 passengers paid five cents each to ride the new trains. The IRT quickly grew to resemble the sprawling system it is today.

The period between World War I and World War II was the golden age of the trolley. Trolleys were operating in virtually every city in the United States by 1917, covering 45,000 miles of track. By the mid-1920s, however, ridership had already begun to decline, largely due to competition from gasoline-powered buses and the emerging automobile. The trolley industry was saved by the development of the PCC car, named for the Electric Railway Presidents' Conference Committee that had spawned its design. The PCC car--lighter, more comfortable, and better-performing than previous streetcars--was a major success and revived streetcar business through the 1930s and early 1940s. After World War II, however, trolley ridership tailed off permanently.

Shift to Public Sector.
The huge surge in the use of automobiles in the postwar era made it extremely difficult for transit companies to operate at a profit. In order for urban transit to survive, a shift from private to public ownership of many major systems became necessary. Under public control, transit systems were expected only to cover operating expenses, such as salaries and routine maintenance, through passenger fares. Capital expenses, such as facility construction, could be met through bond issues or taxation. New York's subway companies and Cleveland's transit were taken over by government agencies as early as 1940 and 1942. Chicago and Boston followed in 1947.

Rise of Buses.
Another postwar trend was the shift from streetcars to buses as the main form of surface transit. By 1960, buses had an annual ridership of 6.5 billion, compared to 463 million streetcar passengers. This transition was assisted by the actions of companies like National City Lines, a transit holding company whose standard procedure was to absorb smaller street rail companies and quickly convert them into motorized bus operations. In 1964, Congress passed the Urban Mass Transit Act, creating a role for the federal government in ensuring the survival of local transit.

Ridership Decline.
The decline in transit ridership eased a bit in the early 1970s, as concerns about energy consumption and environmental issues arose. One result of this modest resurgence was the development of light rail transit (LRT), which first appeared in the form of rehabilitation projects on old trolley lines. After successful LRT systems were launched in Canada in the late 1970s, LRT lines began operating in San Diego in 1981, Buffalo in 1984, and Portland, Oregon, in 1986. Several other cities built LRT systems in the following years.

In the United States in the mid-1990s, there were about 6,000 transit systems in operation. Those systems had active fleets containing 118,000 vehicles. Motorbuses made up the largest portion of transit vehicles, numbering 67,000. Ten thousand heavy rail cars and 4,500 commuter rail cars made up another sizeable share. In 1995, the transit industry had operating funds of $17.6 billion. Nearly half of this revenue was in the form of government assistance from local, state, or federal sources. Passenger fares accounted for about 40 percent of total revenue, just more than $6 billion in 1995. Of the 8.4 billion trips taken on transit in 1994, 5.4 billion were made on buses and 2.7 were made by rail.

Despite the small rebound in the popularity of mass transit that took place in the 1970s, Americans were using it at a lower rate than ever before in the mid-1990s. Only about 5 percent of commuting was done via public transit systems, down from 9 percent in 1970. The exception to this trend was the increased use of vanpools, airport shuttles, and other smaller, nonpublic transit designed for special use.

Government Funding.
Since 1974, more than $70 billion in federal funds have been pumped into the nation's public transit systems. Although federal spending on local transit tailed off somewhat during the Reagan and Bush presidencies, this was offset by increases in local and state funding. In addition, the Intermodal Surface Transportation Efficiency Act of 1991 authorized $31 billion in federal spending from 1993 through 1997.

Despite this huge outlay of money, there was little evidence to suggest that riders choose transit systems over their cars. In some cases, newly built rail systems are merely drawing passengers from existing bus routes. Several systems, such as Miami's $1.2 billion, 21-mile rail system, are attracting fewer passengers than were projected at higher-than-predicted costs. In 1989, Miami's system drew only 15 percent of its projected ridership and cost triple the forecast amount per car to run. A trolley system in Los Angeles cost $700 million more to construct than was projected and ran slower than the bus routes it was designed to replace.

Just at a time when mass transit was receiving increased attention and use, the economic crunch of the early 2000s hit. Financing for public transportation remained a matter of contention as metropolitan areas struggled to balance their budgets. Beginning in the early 1990s, the funding of mass transportation had shifted to depend more heavily on local, state, and federal assistance. For example, in 1991 fare revenues funded 36.6 percent of public transportation costs in cities of more than one million people while local, state, and federal funding was 23.8 percent, 19.2 percent, and 4.1 percent, respectively, according to the FTA. By 2003 fare revenues accounted for just 18.3 percent of funding while local, state, and federal assistance grew to 27.5 percent, 22.9 percent, and 14 percent, respectively. By the mid-2000s, many cities, including San Francisco, New York, and Chicago, were raising fares to combat growing deficits.

Ridership, which held steady at a high of approximately 9 billion during 2001 and 2002, fell off slightly to 8.9 billion in 2003. Nonetheless, ridership levels were much higher during the first years of the 2000s than during much of the 1990s, when rider numbers averaged between 7.5 billion and 8 billion annually. Along with increased use, federal funding also increased significantly, from under $3.5 billion annually during the late 1980s and most of the 1990s to over $6.5 billion in 2003.

In 2005, approximately 1,500 bus transit service providers operated in the U.S. Vanpool providers numbered 69; ferry boat, 47; light rail, 29; commuter rail, 22; and heavy rail, 15. Trolley bus, aerial tramway, monorail, and cable car providers numbered fewer than five each. Together, these modes collected nearly $10.27 billion in fares. Over 150,000 vehicles are in the public transportation fleet, with busses making up 54 percent of the total.

Mass transit got a boost in 2005 with the passage of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). In addition to providing a federal transit investment of $52.6 billion from fiscal year 2004 through fiscal year 2009, including funds previously authorized from TEA-21 extension acts, SAFETEA-LU added a tier to the Urbanized Area Formula to direct funds to Small Transit Intensive Cities.

On the local level, voters approved eight of 13 measures public transportation-related measures on ballots across the country in November 2007. Municipalities that approved measures included Charlotte and Mecklenburg, North Carolina; Fairfax County, Virginia; Toledo, Ohio; Saginaw, Michigan; Kalamazoo, Michigan; and San Francisco, California.

The approval of voters was not a surprise considering the growing numbers of riders. In 2006, a record 10.1 million riders used public transportation, and 2007 was well on its way to surging past that total with 78 million more passengers through the first six months than in the same period in 2006. Commuter rail had the highest growth among all modes, increasing 5.5 percent in the first half of 2007 over the first half of 2006. Light rail followed with ridership growth of 4.1 percent.

Furthermore, in the most extensive survey ever of public transportation, 30 percent of almost 500,000 passengers questioned nationwide from 2000 to 2005 reported that the time they were surveyed was the first year they had used public transportation.

Current Conditions

In 2008, the total number of bus transit service providers fell to 1,100 operating in the United States from an estimated 1,500 reported in 2005. Vanpool providers grew to 83 compared to 69 in 2005, while ferry boat providers fell by 15 to 32 operations. Light rail numbered 33 operations, commuter light rail with 23 operations, and heavy rail had 15 operations. Trolley bus, aerial tramway, monorail, and cable car providers still numbered fewer than five each. A total of 7,700 public transportation providers accommodated more than 10.5 million trips that translated into more than 55.1 million miles.

In March 2010, the APTA conducted a survey of its members to find out how the economic downturn had affected their operations since January 1, 2009. Of the 151 agencies that responded, or 80 percent of public transportation agencies that carry riders in the United States, including 22 light rail operators, 18 commuter rail operators, and 10 heavy rail operators cited declining revenue, service reductions, fare increases, layoffs, and cutback in pay as a result of the stagnant economy. More importantly, it was the larger public transportation agencies that provided more than 25 million trips each year that were affected the worst. More than half of those queried have lowered service during their peak time and another 31 percent have eliminated some of their service area. According to the APTA, "These cutbacks are happening as public transportation is reaching levels of popularity not seen in half a century: despite high unemployment, 2009 saw the second-highest ridership in fifty-three years."

While the American Recovery and Reinvestment Act (ARRA), signed in February 2009, provided $8.4 billion in capital funding for public transportation in the way of improvements, a July 2009 amendment to ARRA allowed public transportation agencies to utilize upwards of 10 percent of their funding for operations. Unfortunately, all but 31 percent had already spent their allotted funds.

Industry Leaders

The largest public transit system in the United States by far is New York's Metropolitan Transportation Authority (MTA), which accounts for more than 2.5 billion passengers per year. With 67,457 employees in 2006, it had total sales of almost $5.5 billion and a net income approaching $1.4 billion. Other large public transit systems include Chicago's Regional Transportation Authority, which handles about 1.5 million riders on an average weekday; the Los Angeles-based Southern California Rapid Transit District with about 1.2 million riders on a typical weekday; and the Washington Metropolitan Area Transit Authority.

In the private sector, the clear industry leader is New Jersey Transit Bus Operations Inc., a subsidiary of the huge New Jersey Transit Corporation. In addition to local buses, New Jersey Transit also operates intercity bus and commuter rail services and three light rail lines, covering about 5,325 square miles in all.

In the late 2000s, New York's Metropolitan Transportation Authority (MTA) with a fleet of 6,300 buses, and about 8,700 rail and subway cars provided transportation to about 2.6 billion passengers each year. MTA reported revenues of nearly $6.1 billion in 2009 with 69,000 employees. Chicago Transit Authority, part of Chicago's Regional Transportation Authority handled about 1.7 million riders on an average weekday. With a fleet of almost 1,800 buses that drive on 140 scheduled routes reported revenues of $503.4 million with 9,644 employees in 2009. Los Angeles-based Southern California Rapid Transit District accommodated more than 1.2 million riders weekly. The Washington Metropolitan Area Transit Authority covered a 1,500 square mile area throughout the nation's capital and in and around the suburbs of Maryland and Virginia. As the second largest rail transit and sixth largest bus network with a fleet of more than 1,500 buses in the U.S. the Metro traveled 350 million rail and bus trips annually generating $803.8 million in 2010 with 11,000 employees.

Additionally, privately held New Jersey Transit Bus Operations Inc. operated more than 2,000 buses with about 240 scheduled bus routes. The company planned to spend an estimated $44 million to replace some 1,400 buses in its fleet.


Of the some 366,000 employees in the transit industry in 2005, according to the Public Transportation Fact Book, approximately 354,000 were operating employees, with about 63.3 percent of them in vehicle operations. Another 17.7 percent of the operating employees were in vehicle maintenance.

Including benefits, the average compensation for transit industry employees in 2005 was more than $55,000. During 2008 the transit industry employed 387,155 workers who earned $23.3 billion.

Research and Technology

The technology of mass transit changes constantly. Many of the industry's developments have been in the area of communications. The Intelligent Mobile Data Network (IMDN) is a network of base stations and antennas scattered over a metropolitan area that can efficiently function as both a communications system and a vehicle locator. Wireless transmission systems, in conjunction with new camera technology, are also being developed for security use on rail platforms. Fare collection is another area that sees constant technological change. Many larger systems are incorporating fare cards and smart cards, which allow passengers to prepay for a variable number of trips. As of the mid-2000s, many commuter busses are equipped with wireless Internet access, electronic signage, and improved accommodations for passengers with disabilities, including audio announcements of stops and systems that lower the bus's front door to make boarding easier.

As environmental concerns continued to trouble the transit industry, the search for efficient alternate fuels for buses remained an ongoing task. In 2006, alternative fuels powered nearly 20 percent of the nation's fixed-route busses; of busses on order, 27 percent will run on alternative fuels.

In the wake of the terrorist attacks of September 11, 2001, the federal government provided funding to upgrade the security of the nation's public transportation system. However, the funding did not solve the problem of exactly how to make the systems safer. For example, during 2004 New York's MTA struggled to devise a plan to effectively use nearly $600 million in counter-terrorism funding. Advanced designed subway doors and an increased number of devices that can detect chemical, biological, and explosive agents were included in the proposed technological advances for the New York subway system.

Use of public transportation is expected to increase over the next decade and beyond as the population ages and seniors who give up driving require alternative means of getting around their communities and maintaining quality of life.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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