Cost-Benefit Analysis of Rural and Small Urban Transit

(Center Identification Number: 79050-02-A)

Problem Statement

Transit systems in rural and small urban areas are often viewed as valuable community assets due to the increased mobility they provide to those without other means of travel. The true value of those services, however, has been largely unmeasured, and there are often impacts that go unidentified. As transit systems compete for local dollars, it is important to identify and quantify, where possible, the impacts that the service has on the community.

The benefits to the transit user include lower cost trips, new trips that are made, and relocation avoidance. The alternative means of travel for transit users, which may involve purchasing an automobile or paying for a taxi ride, are often more expensive. As transit provides access to work, health care, education, shopping, etc., additional trips will be made for these purposes, resulting in increased earnings, improved health, involvement in social activities, and additional spending in the local community. Furthermore, the service reduces the likelihood of transportation-disadvantaged individuals experiencing isolation and depression.

Without transit service, some individuals may need to move to larger communities, which could be costly at the individual level but would also have economic consequences for small communities. By increasing the number of trips made and making it possible for individuals without other means of travel to continue living in their community, transit service has the impact of increasing spending in the community and inducing additional economic activity. Transit service can also provide energy and environmental benefits, through reduced fuel consumption and emissions, and benefits through improved safety and security, which may be especially important for older adults with reduced driving abilities. Finally, the existence of transit operations also creates economic activity in the community. This includes jobs created directly by the transit system, income generated by industries that supply inputs to the transit system, and induced economic activity.

Decision makers need objective and credible information on both the costs and benefits of transit operations to support their decisions regarding investment in public transportation. Some of these benefits lend themselves easily to quantification, while others do not. A full representation of the benefits, including both quantitative and qualitative benefits, is necessary for local and state governments to make informed choices. A number of challenges exist when conducting this type of analysis. The study needs to be careful to avoid double counting, since there are many interrelated benefits; it should include sensitivity and contingency analyses; attempts should be made to quantify as many benefits as possible, but combining benefits into a single measure could be misleading if the data do not lend themselves to such a procedure; and information should be presented in a manner that facilitates decision making.


The proposed objectives of this study are as follows:

1) To develop a detailed methodology for assessing economic benefits of rural transit at the local, statewide, and national levels.

2) To estimate the economic costs and benefits of rural and small urban transit.

3) To identify and describe social, environmental, and other intangible benefits of rural and small urban transit.

4) To develop concise educational material summarizing the costs, benefits, and funding of public transit operations in rural areas.

Research Plan

Task 1. Literature review

Previous research on cost-benefit analysis of transit will be reviewed, with a focus on rural and small urban transit. The literature review will cover the following areas:

  • Benefits associated with transit, especially in rural areas.
  • Transit costs
  • Methodologies used in previous transit cost-benefit analysis
  • Findings from previous transit cost-benefit studies, included sizes of different categories of benefits and overall cost-benefit ratios
  • Examine differences in findings and methodologies from previous studies

Task 2. Develop methodology

Based on previous research, develop a methodology most appropriate for rural transit and apply it to national data. The main benefits to be modeled will include mobility benefits, energy and environmental benefits, safety and security benefits, and economic activity resulting from transit operations.

Task 3. Calculate mobility benefits

First, it will be necessary to estimate the percentage of rural transit trips that would have been made by other modes and how many would have been forgone. Trip purpose data for rural transit trips will also be collected. These can be estimated based on surveys conducted in previous studies, trip purpose data reported by state agencies, an analysis of National Household Travel Survey data, and a possible survey of rural transit providers.

Second, for those who would have made the trip with a different mode, the cost savings to the transit rider would be calculated based on the difference between the cost of the other mode, which in many cases would be the cost to own and operate a private vehicle, and the cost to ride transit.

For trips that would have been foregone in the absence of transit, the cost of those foregone trips, by trip purpose, would be calculated. The costs of missed medical, nutrition, employment, education, shopping, social, and other trips would be estimated based on results from previous research.

Using ridership data from the Rural National Transit Database (Rural NTD), the nationwide mobility benefits provided by section 5311 rural transit providers will be estimated in dollar terms. Community-level mobility benefits will also be estimated for transit systems with different characteristics and services provided.

Task 4. Calculate energy and environmental benefits

Fuel consumption and emissions of rural transit operations will be calculated and compared to the resulting impact if transit riders were forced to other means of travel. Ridership, passenger miles, and fuel consumption data for rural transit providers will be needed. Ridership data is available from the Rural NTD and other data will be obtained through surveys or other resources. Estimates will be made nationwide as well as for transit systems with different characteristics.

Task 5. Calculate safety and security benefits

Safety and security benefits will be measured by comparing the relative safety of transit versus other modes and perceptions of safety and security. Accident statistics will be compared by mode and monetized based on findings from previous research on accident costs.

Task 6. Calculate economic benefits resulting from transit operations

This group of benefits refers to the economic benefits that result due to the existence of the transit operations, including direct and indirect spending and induced economic activity. The direct effect includes the jobs created directly by the transit system – drivers, dispatchers, mechanics, bookkeepers, program directors, etc. The indirect effects result from jobs and income spent in industries that supply inputs to public transit, such as fuel, repairs, insurance, etc. Induced economic activity results from the income generated through both the direct and indirect effects. These induced effects occur when people who work for the transit system or earn income by providing inputs to the transit agency spend their new income in the community. This spending supports additional jobs in the local economy. The impact of transit system expenditures, including the direct, indirect, and induced economic activity will be estimated with a regional, inter-industry input-output analysis.  IMPLAN would be used to calculate the impacts of induced spending.

Task 7. Review other types of benefits

Other potential benefits include congestion mitigation, more efficient use of land, and civic pride. In an analysis of rural or small urban transit systems, these may not be important, but in large urban areas, congestion mitigation and land use impacts are especially important. The impacts of these benefits in rural areas will be evaluated.

Task 8. Analyze transit cost data

Operating and capital cost data for rural transit providers providing section 5311 service are available from the Rural NTD will be presented and analyzed.

Task 9. Calculate cost-benefit ratio

Each category of benefits will be shown individually. An overall cost-benefit ratio will be calculated for those benefits that can be quantified and added together. Some benefits, however, are not easily quantifiable or cannot be added together, so they will be listed individually. Sensitivity analyses will be conducted to show how results change with changes in key variables. Estimates will be conducted on a nationwide basis as well as for different types of transit systems. Cluster analysis will be used to group transit systems into clusters of similar providers. Estimates will be made for each cluster.

Task 10. Create final report

Research results will be made available through a full technical report, a summary report, a PowerPoint presentation with and without an audio recording, and a webinar. The full report will detail the methods and all the findings. The shorter summary report will highlight the major findings. A PowerPoint presentation summarizing the research will be posted online and available to download. A PowerPoint presentation with audio recording will also be made available online and can be viewed at any time. Finally, a free webinar will be conducted, with live participants, describing the research and summarizing the findings, and a recording of the webinar will be available for later viewing. The research will also be presented at conferences and submitted for publication in a journal.

Project Schedule

October 2012 to January 2014

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