Economic impact analysis of Georgia's rural and small urban transit systems, part 1

GEORGIA DOT RESEARCH PROJECT 18-14
FINAL REPORT VOLUME 1
ECONOMIC IMPACT ANALYSIS OF GEORGIA'S RURAL AND SMALL URBAN
TRANSIT SYSTEMS
OFFICE OF PERFORMANCE-BASED MANAGEMENT AND RESEARCH
600 W PEACHTREE ST. NW ATLANTA, GA 30308

1. Report No. FHWA-GA-21-1814

2. Government Accession No. 3. Recipient's Catalog No.

N/A

N/A

4. Title and Subtitle Economic Impact Analysis of Georgia's Rural and Small Urban Transit Systems, Volume 1

5. Report Date December 2020
6. Performing Organization Code N/A

7. Author(s)

8. Performing Organ. Report No.

Shatakshee Dhongde, Laurie A. Garrow

RP 18-14

9. Performing Organization Name and Address

10. Work Unit No.

Georgia Institute of Technology

N/A

790 Atlantic Drive

11. Contract or Grant No.:

Atlanta, GA 30332-0355

PI#0016121

12. Sponsoring Agency Name and Address

13. Type of Report and Period

Georgia Department of Transportation

Final Report (August

Office of Performance-Based Management and Research

2018December 2020)

600 W Peachtree St. NW

14. Sponsoring Agency Code

Atlanta, GA 30308

N/A

15. Supplementary Notes

Prepared in cooperation with the U.S. Department of Transportation, Federal Highway Administration.

16. Abstract

On March 30, 2017, the Georgia Legislature passed House Resolution 848 to create a Commission on

Transit Governance and Funding. The Commission's mission is to "study and assess the needs for and

means of providing a system of mass transportation...in the state and [identify] potential methods of

funding such systems" (HR 848). Currently, the State of Georgia has 21 distinct Federal Transit

Administration (FTA) grant recipients that provide transit service to 14 urban areas and 114 counties

with rural populations. GDOT is responsible for administering and providing oversite for FTA grants

received by small urban areas with a population less than 200,000 and rural counties.

The establishment of the Commission shines a spotlight on transit in Georgia. To justify additional funding for transit, the Commission will need information on the economic impact of the provision of transit services on the State's economy. The final report for this project is divided into two volumes. Volume 1 quantifies these economic impacts in the rural and small urban areas that fall under GDOT's responsibility. Volume 2 conducts an analysis of mobility and accessibility in rural areas in Georgia using a database of rural transit trips and provides a high-level assessment of costs of expanding and initiating service from 6 AM 4 PM Monday through Saturday in all Georgia counties with rural populations. The analysis shows that expansion and initiation of service at the proposed level would increase ridership by 400,000 (or 38 percent from FY 2018 levels) and costs by $9M (or about 21 percent from FY 2018 levels). Further, many of the areas in which service would be initiated are in counties with the lowest levels of accessibilities.

17. Key Words Rural transit; Benefit-cost analysis

19. Security Classification (of this report)
Unclassified
Form DOT 1700.7 (8-69)

20. Security classification (of this page)
Unclassified

18. Distribution Statement No Restrictions

21. Number of Pages
54

22. Price Free

GDOT Research Project 18-14 Final Report
ECONOMIC IMPACT ANALYSIS OF GEORGIA'S RURAL AND SMALL URBAN TRANSIT SYSTEMS
Volume 1
By Shatakshee Dhongde, Ph.D. Associate Professor of Economics
Laurie Anne Garrow, Ph.D. Professor of Civil and Environmental Engineering
Contract with Georgia Department of Transportation
In cooperation with U.S. Department of Transportation Federal Highway Administration
December 2020
The contents of this report reflect the views of the authors who are responsible for the facts and the accuracy of the data presented herein. The contents do not necessarily reflect the official views or policies of the Georgia Department of Transportation or the Federal Highway Administration. This report does not constitute a standard, specification, or regulation.
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TABLE OF CONTENTS
LIST OF TABLES ............................................................................................................ v
LIST OF SYMBOLS AND ABBREVIATIONS .......................................................... vii
EXECUTIVE SUMMARY .............................................................................................. 1
CHAPTER 1 INTRODUCTION ..................................................................................... 4 Rural Transit in Georgia ............................................................................................. 5 Small Urban Transit in Georgia ................................................................................. 6 FTA Funding and Grants Program ........................................................................... 7
CHAPTER 2 REVIEW OF LITERATURE .................................................................. 9
CHAPTER 3 DATA........................................................................................................ 13
CHAPTER 4 RURAL TRANSIT: ECONOMIC COSTS........................................... 15 Operating Costs .......................................................................................................... 15 Capital Costs............................................................................................................... 18
CHAPTER 5 TYPE OF ECONOMIC BENEFITS ..................................................... 20 Total Output ............................................................................................................... 20 Value Added in Production ....................................................................................... 21 New Jobs Created....................................................................................................... 21 Household Income and Tax Revenue ....................................................................... 21 Estimating Benefits with the IMPLAN Model ........................................................ 22
CHAPTER 6 RURAL TRANSIT: ECONOMIC BENEFITS .................................... 23 Total Benefits .............................................................................................................. 23 Benefits from Operating Costs.................................................................................. 25 Benefits from Capital Costs ...................................................................................... 27 Benefits from Capital Costs: Different Scenarios ................................................... 30
CHAPTER 7 SMALL URBAN TRANSIT: ECONOMIC COSTS ........................... 32 Operating Costs .......................................................................................................... 32 Capital Costs............................................................................................................... 33
CHAPTER 8 SMALL URBAN TRANSIT: ECONOMIC BENEFITS..................... 35
CHAPTER 9 SUMMARY AND CONCLUSIONS...................................................... 38
APPENDIX ...................................................................................................................... 42
ACKNOWLEDGMENTS .............................................................................................. 45
iii

REFERENCES................................................................................................................ 46
iv

LIST OF TABLES
Table 1. Small urban transit location and type. ............................................................ 7 Table 2. Summary of economic benefits of public transit in sample of literature...... 12 Table 3. Sources of operating costs of rural transit. ................................................... 16 Table 4. Operating costs and fare box recovery ratio for rural transit. ....................... 17 Table 5. Operating costs and fare box recovery ratio for rural transit, percentile
rankings. ................................................................................................................. 18 Table 6. Sources of total capital costs of rural transit................................................. 19 Table 7. Economic impact of rural transit. ................................................................. 24 Table 8. Fiscal impact of rural transit. ........................................................................ 24 Table 9. Economic impact of operation costs of rural transit. .................................... 25 Table 10. Top 10 sectors with highest number of jobs created from operation
costs of rural transit. ............................................................................................... 26 Table 11. Fiscal impact of operation costs of rural transit.......................................... 27 Table 12. Economic impact of capital costs of rural transit: Scenario 1. ................... 27 Table 13. Top 10 sectors with highest number of jobs created from capital costs
of rural transit: Scenario 1. ..................................................................................... 29 Table 14. Impact of rural transit in terms of tax revenues: Scenario 1. ...................... 30 Table 15. Economic impact of capital costs of rural transit: Different scenarios....... 31 Table 16. Sources of operating costs of small urban transit. ...................................... 33 Table 17. Sources of capital costs of small urban transit............................................ 34 Table 18. Economic impact of small urban transit. .................................................... 35 Table 19. Top 10 sectors with highest number of jobs created from operation
costs of small urban transit. .................................................................................... 36 Table 20. Fiscal impact of small urban transit. ........................................................... 37 Table 21. Economic impact of rural and small urban transit combined. .................... 40 Table 22. Fiscal impact of rural and small urban transit combined............................ 40
v

Table 23. Average operating and capital costs for rural transit by provider............... 42 Table 24. Average operating and capital costs for small urban transit by cities. ....... 44
vi

LIST OF SYMBOLS AND ABBREVIATIONS APTA American Public Transportation Association
DHS Department of Health and Human Services FTA Federal Transit Administration
FY Fiscal Year GDOT Georgia Department of Transportation IMPLAN Impact Analysis for Planning MARTA Metropolitan Atlanta Regional Transit Authority
NTD National Transit Database RER Regional Express Rail RIMS Regional InputOutput Modeling System
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EXECUTIVE SUMMARY
This report is based on the findings of a project funded by GDOT entitled Economic Impact Analysis of Georgia's Rural and Small Urban Transit Systems. The project findings are summarized in two reports, Volume 1 and Volume 2. Each report is intended as both a standalone document and as a component of a larger effort to improve transit statewide in close collaboration with GDOT. In Volume 1 of this report, the research team estimated the economic costs and benefits of rural and small urban transit in Georgia.
Scope:
The analysis covered more than 80 transit agencies, which provide service to 114 rural counties and 9 counties in small urban areas in Georgia.
The researchers compiled data from the National Transit Database (NTD) for the three most recent years (FY 2016, FY 2017, and FY 2018) and presented the average values of economic costs and benefits.
The researchers conducted a comprehensive review of literature on rural and urban transit systems and found their estimates to be consistent and within the range of values found in this literature.
The researchers estimated economic costs and associated benefits separately for both operating costs and capital costs and for rural and small urban transit.
Economic Costs:
On average, annual total operating costs were $32 million for the rural transit system and $52 million for the small urban transit system.
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Compared to rural transit's annual capital costs of about $5.7 million, capital costs for small urban transit were nearly three times greater and amounted to more than $14.5 million, on average.
Model:
The developed economic impact analysis model assumed 90 percent of the operating costs and 50 percent of capital costs were spent locally.
The researchers used statewide multipliers to estimate how expenditure on rural transit expenditure led to an increase in total output; employment; wages; valueadded; and local, state, and federal tax revenues.
Economic Benefits:
The researchers estimated that, on average, $85.5 million were spent annually by rural and small urban transit systems in Georgia. The economic impact analysis model estimated that this expenditure resulted in a total of $175.6 million in economic benefits. Thus, for every dollar invested in transit, $2.05 were generated in economic benefits.
Results showed that of the total economic benefit of $175.6 million, about $10.1 million were generated as a direct impact of the transit expenditure, about $121.6 million resulted from the indirect impact of transit expenditure, and the remaining $43.9 million were due to the induced impact of transit expenditure. Thus, a significantly large amount, almost 70 percent of the economic benefit, was generated through the indirect benefit of transit.
2

In addition to the increase in total output, the research team estimated that rural and small urban transit led to the creation of nearly 2,600 jobs within Georgia. Of these, 1,654 jobs resulted from small urban transit and 946 resulted from rural transit expenditure. Many jobs were created in the transportation sector, but jobs were also created in related sectors such as insurance agencies, building services, real estate, maintenance and construction, wholesale trade, and restaurants.
Economic benefits from rural and small urban transit led to $5.9 million annually in state and local taxes and $12.5 million in federal taxes. State and local taxes benefited largely from an increase in sales tax revenue, whereas federal tax revenue was generated from additional household income.
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CHAPTER 1 INTRODUCTION
Transit services play an important role in providing daily access to work, school, health care, and other activities. According to a study by the American Public Transportation Association (APTA; Litman 2017), from 2007 to 2015 America's small town and rural public transit ridership have increased by nearly 8 percent (i.e., 7.8 percent) even though the rural population declined by more than half a million people during that time. Over the last two decades, rural public transit agency funding, vehicle revenue-miles, and passenger trips also increased (Mattson and Hough 2015). However, some types of public transportation, particularly intercity bus services, have declined in recent years (BTS 2011), resulting in many rural communities losing scheduled intercity transport (Litman 2017).
Public transit helps rural and small urban communities become more efficient and equitable, since it provides increased mobility to those without other modes of transport. Therefore, it helps ensure that all residents, including non-drivers, enjoy independent mobility and receive a fair share of public spending on transportation facilities and services. Provision of transit can result in multiple benefits, such as: economic (e.g., increase in output and employment); social (e.g., savings in transportation costs); environmental (e.g., improved air quality); and health (e.g., access to health care facilities). This study focuses on an economic impact evaluation of transit systems operating in rural and small urban areas in the State of Georgia.
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Rural Transit in Georgia According to the Federal Transit Association (FTA 2018), rural areas are defined as those that have a contiguous population of 50,000 or less. In Georgia, according to the 2018 U.S. Census, 17 percent of the total population live in rural areas.
Rural populations tend to be older. The 2017 Rural Transit Fact Book (Mattson 2017) notes that an aging population in rural areas presents a number of transportation challenges. Throughout the United States, the median age is 44 years in rural areas and 37 in urban areas. Approximately 18 percent of residents in rural areas are 65 years or older, compared to 14 percent of those in urban areas. In Georgia, the median age is 40.5 years in rural areas and 35 in urban areas. Around 16.8 percent of residents in rural areas are 65 years or older, compared to 10.7 percent of those in urban areas (American Community Survey 2017).
Rural transit systems are defined as those receiving Section 5311 Non-Urbanized Area (Rural) Formula Program funding and that report to the Rural National Transit Database (Rural NTD). A national report on rural transit found that among rural transit providers, 58 percent operate five or fewer vehicles (Godavarthy et al. 2015).
The rural transit system in Georgia operates as demand-responsive bus systems; there is no provision of a fixed-route transit system in rural Georgia. A recent report by Garrow et al. (2018) noted that in FY 2017 Georgia had 83 rural transit providers--the most of any state in the nation. In FY 2017, all but four of these transit providers were managed by individual counties.1 The 83 transit providers delivered service to 114 counties, which is 71.7 percent
1 The regional commissions that operate transit systems are Three Rivers, Southwest Georgia, and Coastal Regional Commissions; Lower Chattahoochee is a Transit Authority.
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of all counties in Georgia. Except for transit systems operated by regional commissions, all other systems operated in counties with populations ranging from 1,884 to 235,896 (American Community Survey 2017). Small Urban Transit in Georgia Small urban transit agencies are defined as those receiving Section 5307 Urbanized Area Formula Program funding and serving areas with a population between 50,000 and 200,000. Following Garrow et al. (2018), this study will focus on nine counties that receive FTA urban funds and are not part of the Atlanta Regional Commission.2 Note that a county can have a mix of rural, small urban, or urban areas and, thus, receive different types of funding from the FTA (e.g., Hall and Richmond Counties in Georgia). The nine counties, the principle cities they service, and the categories of their service are shown in table 1. All counties except Hinesville provide both fixed bus route service and demand-response service; Hinesville County provides only fixed bus route service.3
2 To make this study comparable with Garrow et al. (2018), Bartow County is not included. 3 Since FY 2019, Hinesville has added demand-response service.
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Table 1. Small urban transit location and type.

City

County

Albany

Dougherty

Athens

Clarke

Augusta

Richmond

Columbus

Muscogee

Gainesville

Hall

Hinesville

Liberty

Macon

Bibb

Rome

Floyd

Savannah

Chatham

Source: Garrow et al. 2018.

Fixed Bus Route Service Yes Yes Yes Yes Yes Yes Yes Yes Yes

Demand-Response Yes Yes Yes Yes Yes No Yes Yes Yes

FTA Funding and Grants Program The Federal Transit Administration provides funding for the construction, operation, and maintenance of public transportation systems. The State of Georgia is included in Region 4 of the 10 regions defined by the FTA.4 FTA funding for public transit in rural and small urban areas in Georgia is administered by the Georgia Department of Transportation (GDOT). In addition to the FTA programs described below, the Department of Health and Human Services (DHS), the state government, and local counties also provide funding for rural transit.
Urbanized Area Formula Program (5307): This program makes federal resources available to urbanized areas and to governors for transit capital and operating assistance in

4 Region 1: Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island, and Vermont; Region 2: New York and New Jersey; Region 3: Delaware, District of Columbia, Maryland, Pennsylvania, Virginia, and West Virginia; Region 4: Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, The Commonwealth of Puerto Rico, and the United States Virgin Islands; Region 5: Illinois, Indiana, Minnesota, Michigan, Ohio, and Wisconsin; Region 6: Arkansas, Louisiana, New Mexico, Oklahoma, and Texas; Region 7: Iowa, Kansas, Missouri, and Nebraska; Region 8: Colorado, Montana, North Dakota, South Dakota, Utah, and Wyoming; Region 9: Arizona, California, Hawaii, Nevada, Guam, American Samoa, and North Marianas; Region 10: Alaska, Idaho, Oregon, and Washington; FTA website: https://www.transit.dot.gov/
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urbanized areas and for transportation-related planning. For urbanized areas under 200,000 in population, the funds are apportioned to the governor of each state for distribution.
Rural Formula Program (5311): The Formula Grants for Rural Areas program provides capital, planning, and operating assistance to states to support public transportation in rural areas with populations of less than 50,000, where many residents often rely on public transit to reach their destinations. These funds are apportioned to states based on a formula that includes land area, population, revenue vehicle miles, and low-income individuals in rural areas.
Enhanced Mobility of Seniors and Individuals with Disabilities (Section 5310): This program provides formula funding to states for assisting private nonprofit groups in meeting the transportation needs of older adults and people with disabilities when the transportation service provided is unavailable, insufficient, or inappropriate to meeting these needs.
Job Access and Reverse Commute Program (5316): This program has been repealed. It was established to address the unique transportation challenges faced by welfare recipients and low-income persons seeking to obtain and maintain employment.
New Freedom Formula (5317): This program has expired and eligible funding is made available through Section 5310. This formula grant program aimed to provide additional tools to overcome existing barriers faced by Americans with disabilities seeking integration into the workforce and full participation in society.
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CHAPTER 2 REVIEW OF LITERATURE
In recent years, interest in evaluating public transit has grown from both policy-makers and researchers. These analyses are conducted at various geographic scales, including studies assessing the national picture (Burkhardt et al. 1998; Burkhardt 1999; Weisbrod et al. 2014; Godavarthy et al. 2015); statewide studies (Peng and Nelson 1998; Southworth et al. 2004; Penet 2010; Ferrell 2015; Mattson and Hough 2015; Godavarthy et al. 2015); studies comparing different metropolitan areas (Baum-Snow and Kahn 2000); and studies focused on a single metropolitan area (Bollinger and Ihlanfeldt 1997; Clarke et al. 2012; Mayer and Trevien 2017). Table 2 classifies some of this literature and its findings.
Most of the studies estimate economic impacts by using inputoutput models, such as the Impact Analysis for Planning (IMPLAN) model (Southworth et al. 2004; Penet 2010; Clarke et al. 2012; Weisbrod et al. 2014) and the Regional InputOutput Modeling System (RIMS) (Peng and Nelson 1998; Godavarthy et al. 2015). As detailed in Weisbrod et al. (2014), spending on public transit typically leads to economic benefits through three channels: (1) direct effects, via workers and business engaged in the manufacturing of vehicles and control equipment, construction of station facilities, and operation of public transit services; (2) indirect effects, via supporting industries that supply goods and services to enable the direct spending, including workers in industries supplying the engines; equipment parts; and the steel, concrete, wood, and plastic materials that are needed for building vehicles and station facilities; and (3) induced effects, via re-spending of worker income on consumer goods and services, including food, clothing, recreation, and personal
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services. The resulting benefits include increasing employment, boosting business sales and the economy as a whole, and generating additional tax revenue.
The employment benefits arising from public transit are important, since public transit does not only provide transit-related work, but also commutes people to work (Bollinger and Ihlanfeldt 1997; Southworth et al. 2004; Penet 2010; Clarke et al. 2012; Weisbrod et al. 2014; Godavarthy et al. 2015; Mayer and Trevien 2017). In 1998, in the State of Tennessee, Southworth et al. (2004) estimated that the gross economic impact of urban transit expenditures was about $80 million and 2,600 new jobs. Weisbrod et al. (2014) found a national average of 21,800 jobs was generated per billion dollars of investment, and these jobs consisted of two parts: 15,900 per billion dollars of capital investment, and 24,200 per billion dollars of operations investment. Clarke et al. (2012) estimated that the Metropolitan Atlanta Regional Transit Authority's (MARTA's) capital budget supports 7,000 to 15,000 jobs in the service area each year. Mayer and Trevien (2017) took advantage of a natural experiment provided by the opening and progressive extension of the Regional Express Rail (RER) between 1970 and 2000 in the Paris metropolitan region and found that employment rose by 8.8 percent in connected municipalities over the 1975 1990 period. However, not all studies found a large employment benefit from public transit. Bollinger and Ihlanfeldt (1997) studied the economic impacts of Atlanta's MARTA rail transit system and found no discernible impact on employment in station areas. Penet (2010) and Godavarthy et al. (2015) observed that rural and small urban areas tend to capture fewer economic and employment benefits from transit services. Chu (2013) showed that the economic impacts of the same amount of spending could vary significantly between local areas if the pattern of their funding and spending differ. If outside funds are
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spent on goods and services produced outside the area, there will be no economic impact. If outside funds are spent within the local area, there will be a positive effect. If local funds are spent locally, the effect will approximately be zero because those funds could also be spent locally for non-transit purposes; and if local funds are spent outside the area, there will be a negative effect. In his study of central Florida, Chu found that the rate of return is much higher for operations and maintenance spending than for capital spending because a much higher percentage of funds spent on capital expenditures, such as vehicle purchases, was spent outside the local area.
Economic benefits arise when people spend out-of-pocket cost savings on other goods and services, as well as when the operation and maintenance of public transit spurs direct, indirect, and induced economic activity (Penet 2010; Godavarthy et al. 2015; Weisbrod et al. 2014). Penet (2010) analyzed the economic impacts of public transit expenses by impact metric and by transit agency in South Dakota. His results showed that statewide, the spending of out-of-pocket cost savings generated $7.6 million in total output in 2010, including $4.4 million in total value added. Chu (2013) estimated a total gross sales (output) worth $221.67 million, and a value added from total transit spending of $99.07 million. For small urban transit systems, the spending of out-of-pocket cost savings generated $1.45 million in business output in 2010, including $844 thousand in total value added. Godavarthy et al. (2015) found that every $1 invested in public transportation results in $1.35 in output, $0.57 in value added, and $0.37 in earnings. Similarly, Weisbrod et al. (2014) showed an average of $3.00 impact on business output per dollar of public transportation spending, including an average of $1.70 in value added.
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Table 2. Summary of economic benefits of public transit in sample of literature.

Author(s)

Scope of the Study

Job Creation

Total Output Tax Revenues

Southworth 2004

Statewide urban, Tennessee

2,600 jobs statewide $1: $1.14

--

Penet 2010

Statewide urban and rural, South Dakota

530 jobs statewide

$1: $1.90

$1: $0.06 operating costs
$1: $0.25 capital costs

Clarke et al. 2012

Urban metropolitan area, Atlanta

7,800 jobs in the service region, 6,000 jobs elsewhere from operating costs;
7,000 to 15,000 jobs in the service region from capital costs

$1: $3.25

Chu 2013

Urban counties, Central Florida

1,909 jobs in 8 counties

$1: $1.37

Weisbrod et al. 2014

National, the U.S.

$1: $3.10 operation cost
$1: $2.90 capital costs

$1: $0.50 operating costs
$1: $0.27 capital costs

Godavarthy et al. 2015

National, the U.S.; statewide, North Dakota

$1: $1.35

Note: Total output can be read, for instance as, every $1 invested as capital cost or every $1 spent as operating cost led to $1.14 in net value added to the economy. Similarly, tax revenue shows that for every $1 invested as capital cost or every $1 spent as operating cost resulted, for instance, in $0.25 as tax revenue.

Economic benefits also include fiscal impact, which is generated because of additional labor income and is a consequence of additional business activity (Peng and Nelson 1998; Penet 2010; Weisbrod et al. 2014). Peng and Nelson (1998) found that although the fiscal revenue impact of rural transit service varies depending on the availability and the amount of federal transit subsidy, its impact is positive and is larger than 1.0 for the State of Georgia as a whole. In Weisbrod et al. (2014), a national average of $0.42 impact on overall tax revenue per dollar of public transit spending was estimated, which was further broken down as $0.27 on federal tax revenues, and $0.16 on state and local tax revenues.

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CHAPTER 3 DATA
According to the FTA (2018), Congress established the National Transit Database (NTD) to be the Nation's primary source for information and statistics on the transit systems of the United States. The statute requires that recipients or beneficiaries of grants from the FTA under the Urbanized Area Formula Program (5307) or Other than Urbanized Area (Rural) Formula Program (5311) submit data to the NTD. The NTD records the financial, operating, and asset conditions of transit systems. For instance, variables measuring how much each county received from federal funds, local funds, fare revenue, and contract revenue to cover operating and capital costs are included in the data. Additionally, data on annual vehicle revenue miles and hours, and number of passenger trips are also provided in the NTD.
In this analysis, data for Georgia's rural and small urban transit systems were compiled for the three most recent years, namely FY 2016, FY 2017, and FY 2018. Since operating and capital costs tend to vary from one year to another, an average of the three years was taken. A total of 83 rural transit agencies and 9 small urban transit agencies were included. For rural transit systems, the researchers directly obtained the annual data from the rural NTD. The operating funds consist of federal 5310 funds, 5311 funds, 5316 funds, and 5317 funds as well as local funds, actual fare box, contract revenues, and partially allocated costs. The capital funds consist of 5311 funds, 5316 funds, and 5317 funds from federal, state, and local. Furthermore, the research team calculated the operating cost per trip and operating cost per mile by the total miles and total trips that the NTD provides. For small urban transit systems, data were compiled from their annual agency profiles that are recorded in the
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NTD. According to their profiles, both their operating costs and capital costs mainly consist of fare revenue, local funds, state funds, and federal funds.
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CHAPTER 4 RURAL TRANSIT: ECONOMIC COSTS
Operating costs refer to costs typically consumed within the year to operate services. Capital costs are associated with long-term transit agency assets. Table 3 and table 6 compile data on operating and capital costs for rural transit by funding programs. As shown in the tables, both operating and capital costs were covered by federal, state, and local governments.
Operating Costs Operating costs include costs of labor, fringe benefits, materials and supplies (e.g., fuel), maintenance, office space, equipment, and administrative costs. Total operating costs for rural transit in Georgia amounted to $3032 million. A large share (i.e., 40 percent) of the operating costs was covered by funds from federal and local governments. A majority of federal funds supporting operating costs came from the Rural Formula Program (5311) and the Enhanced Mobility of Seniors and Individuals with Disabilities Program (5310). Contract revenue and fare revenues accounted for about 5 percent of the total operating costs. Of note, in FY 2016, the local government's share of operating costs was only about 25 percent and contract revenue accounted for nearly 20 percent of the costs; however, in FY 2017 and FY 2018, the local government's share increased to almost 45 percent. This particular increase was largely because of changes in accounting that helped more clearly identify contracts and local revenues.
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Table 3. Sources of operating costs of rural transit.

FY 2016

Costs ($)

%

Federal

13,499,724 43.65

5316

93,645

5317

30,779

5311

12,673,380

5310

701,920

Local

8,105,035 26.21

Fare Revenue

1,822,000 5.89

Contract Revenue

6,340,195 20.50

Partially Allocated Cost

1,161,990 3.76

Total

30,928,944

100

Source: Rural National Transit Database

FY 2017

Costs ($)

%

13,819,052 43.00

19,948

17,270

12,901,228

880,606

14,077,819 44.00

1,619,055 5.00

1,807,940 5.66

644,045 2.01

31,967,911

100

FY 2018

Costs ($)

%

14,052,015 42.89

13,304

11,237

13,208,049

819,425

14,461,393 44.14

1,381,469 4.22

2,525,322 7.71

344,937 1.05

32,765,136

100

Average

Costs ($)

%

13,790,264 43.25

42,299

19,762

12,927,552

800,650

12,214,749 38.31

1,607,508 5.04

3,557,819 11.16

716,991 2.25 31,887,330 100.00

Table 4 summarizes operating costs per mile and the fare box recovery ratio for the three years. On average, rural transit users took 1,777,400 rides per year and traveled approximately 17,210,790 miles. The operating expense per trip was $17.97, and the operating expense per mile was $1.85. The fare box recovery ratio of a passenger transportation system is the fraction of operating expenses, which are met by the fares paid by passengers. It is computed by dividing the system's total fare revenue by its total operating expenses. The median fare box recovery ratio shows that fare revenues covered 5 percent of the operating costs.

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Table 4. Operating costs and fare box recovery ratio for rural transit.

Total (Demand-Response Only) Total Rides (thousands)
Operating Expense per Trip (dollars)
Total Vehicle Miles (thousands)
Operating Expense per Mile (dollars)
Fare Box Recovery Ratio, Median
Source: Rural National Transit Database

FY 2016 1,849.33
16.72 17,670.53
1.75 0.06

FY 2017 1,761.51
18.15 17,062.87
1.87 0.05

FY 2018 1,721.35
19.03 16,898.96
1.94 0.04

Average 1,777.40
17.97 17,210.79
1.85 0.05

Table 5 shows percentile rankings for operating costs per trip and per mile, and for the fare box recovery ratio for FY 2018 across rural counties in Georgia. The percentile rank is the percentage of transit agencies with values at or below the reported number. For example, 10 percent of transit agencies had operating costs per trip at or below $11.83 (e.g., Wayne County Transit), while 50 percent had an operating expense per trip at or below $17.85 (e.g., Tift Transit System), and 90 percent of transit agencies had operating costs at or below $30.97. Note that counties belonging to the different percentiles differ depending on the cost variable. For example, the Tift Transit System, which cost $15.99 per trip, $3.62 per mile, and had a fare box recovery ratio of 0.13 in FY 2018, belongs to the 50th percentile, 90th percentile, and 90th percentile in each category, respectively. Overall, as seen in table 5, when comparing the 90th with the 10th percentile, operating costs per trip and per mile almost tripled, and the fare box recovery was more than fivefold times higher, underscoring the fact that there is significant variation in operating costs across transit agencies.

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Table 5. Operating costs and fare box recovery ratio for rural transit, percentile rankings.

Percentile Rank (Demand-Response Only)

Operating Expense ($)

Per Trip

Per Mile

10th

11.83

1.35

20th

13.22

1.51

50th

17.85

1.99

75th

25.59

2.43

90th

30.97

3.34

Source: Rural National Transit Database 2018

Fare Box Recovery 0.02 0.03 0.04 0.07 0.11

Capital Costs Capital costs include expenses toward long-term acquisitions and leases of physical assets such as buses, garages, and maintenance facilities, as well as small purchases like computers and tablets. NTD defines capital expenses as costs exceeding $5,000 or any capitalization value established by the local government.
Total capital costs for rural transit amounted, on average, to $5 million or about one-sixth of the operating costs. A majority of capital costs (i.e., 80 percent) were provided by the federal funding agencies. The remaining were split evenly with 10 percent from the state FTA and 10 percent from the county FTA (see table 6). Programs such as the Job Access and Reverse Commute Program (5316) and the New Freedom Formula (5317) provided partial funds, but both of these programs have since expired. Significant federal, state, and local funds supporting capital costs came from the Rural Formula Program (5311).

18

Table 6. Sources of total capital costs of rural transit.

FY 2016 Costs ($) %

FY 2017 Costs ($) %

Federal 3,617,981 81.15 6,898,118 80.56

5316

341,092

323,506

5317

139,427

99,996

5311 3,137,462

6,474,616

State

451,109 10.12 862,264 10.07

5316

41,504

40,438

5317

17,428

12,499

5311

392,177

809,327

Local

389,347 8.73 802,163 9.37

5311

389,347

802,163

Total

4,458,437

100 8,562,545

100

Source: Rural National Transit Database

FY 2018 Costs ($) %

3,363,496 81.14

364,043

0

2,999,453

414,013 9.99

39,081

0

374,932

367,900 8.87

367,900

4,145,409

100

Average Costs ($) % 4,626,532 80.85
342,880 79,808
4,203,844 575,796 10.06 40,341 9,976 525,479 519,803 9.08 519,803
5,722,131 100.00

Note that the NTD data used are available by the source of funding agency, and include data on total costs, as well as data by regional providers (see table 23 in the appendix). However, data were not available on how the operating cost or the capital expenses were disbursed. The rural NTD provides data for only the total amount of capital spending.

19

CHAPTER 5 TYPE OF ECONOMIC BENEFITS
Economic benefits are measured from rural transit by using several indicators. Economic activity is measured in terms of increase in total output, value added, jobs created, income generated, and resulting federal and state/local tax revenues. Rural transit generates three types of economic benefits, broadly classified as benefits occurring from direct spending, indirect spending, and induced economic activity.
Total Output When capital expenditure is undertaken toward purchasing buses, for instance, there is a trickle down of different impacts on the total output in the economy. The first effect, also known as the direct effect, is due to the initial spending that is undertaken by the transit agencies. A simple example is an agency that purchases concrete blocks to build a garage in which to store buses when not in use. Second, the initial spending creates demand for goods and services among firms operating in the supply chains of related industries. For example, the manufacturing firm from whom the concrete blocks were purchased will spend money on purchasing raw materials such as gravel and sand. This demand is classified as the indirect effect. Finally, the direct and indirect spending effects result in additional compensation to workers. With the added income, workers undertake additional spending. Workers in the firm building the concrete blocks and workers using concrete blocks to construct the garage for the transit agency will all receive additional income, which they will spend on, for instance, meals, clothes, and other consumer goods. This additional spending is referred to as induced effects. In other words, each investment sets in motion secondary expenditures because contractors buy goods and services from
20

suppliers, hire subcontractors, and make payments to workers and suppliers. As suppliers, subcontractors, and workers spend portions of their income on other goods and services, new rounds of spending occur. The sum of these indirect and induced effects represents the multiplier effect of the spending on transit.
Value Added in Production Value added is the output as measured by final sales minus the value of the intermediate goods and services required to create the new output. Value added measures the contribution to new economic output made by an individual producer, sector, or industry.
New Jobs Created Transit agencies employ workers for day-to-day operations, and they employ additional workers when they undertake capital expenses, such as the purchase of vehicles or construction and maintenance of facilities. The new demand helps to sustain the existing workforce and typically results in an expansion of new hiring. Jobs created measures the number of new full- and part-time employees. When each of these workers who receives additional revenue further spends this revenue in the market, there is a chain effect often referred to as indirect economic benefits.
Household Income and Tax Revenue The wage income paid to transit system workers leads to an increase in income tax. A boost to household income is generated when not only more output is produced but also when more workers are hired to fill the new jobs created. Additional tax revenues are derived
21

from the increase in final sales. The revenues come from sales and excise taxes, customs duties, property taxes, motor vehicle licenses, severance taxes, and special assessments.
Estimating Benefits with the IMPLAN Model In this study, the research team estimated the above-listed benefits from transit using the model provided by the Impact Analysis for Planning model. Besides IMPLAN, previous studies have also used models from the Regional InputOutput Modeling System. The inputoutput model is based on a social accounting table with nearly 500 sectors. The model replicates industry supply chain linkages and patterns of household expenditures at the county or state level. Multipliers are used to estimate how expenditure on rural transit led to an increase in total output, employment, wages (household income), value-added (new value created at each stage of production), and tax receipts (county and state tax revenues). Multipliers reflect the interactions across all industries and sectors, and are updated as the conditions of the economy change over time. The researchers conducted this analysis using statewide multipliers, that is, they estimated the statewide impact of the transit costs. The estimated impact would be smaller if the analysis had been conducted at a county level because the multipliers at that level capture a smaller percentage of the economic activity.
22

CHAPTER 6 RURAL TRANSIT: ECONOMIC BENEFITS
This chapter first summarizes the total benefits resulting from the combination of operational costs and capital costs. The subsequent sections show these benefits separately for the operating and capital costs and discuss them in detail.
Total Benefits Operating costs were treated as a change in the industry spending pattern since these consist of expenses for day-to-day operations and maintenance. Typically, not all capital costs are spent within the state, since they include the purchase of a new fleet of vehicles or equipment, construction of transit facilities, etc. Capital costs were treated as a change in industry investment.
The researchers made the following assumptions: (1) most (i.e., 90 percent) of operating expenses were spent within the state; (2) 50 percent of capital costs were spent within the state.5 All costs were averaged over time, for FY 2016, FY 2017, and FY 2018. A total of $31,559,663 was spent annually on rural transit. With an estimated total benefit of $64,605,620 in terms of increase in output (see table 7), every dollar spent on rural transit translates to $2.05 in economic benefits.6 This return on investment in rural transit lies within the range of $1.14 to $3.25 in economic benefits found in the literature. In terms of fiscal impact, a dollar spent on rural transit led to $0.14 in tax revenue, which is consistent with previous studies (see table 8).
5 A later section in this chapter, Benefits from Capital Costs: Different Scenarios, analyzes two scenarios where 90 percent and 25 percent of capital costs were assumed to be spent within the state.
6 Measured per dollar benefit as total benefit per unit of funds spent within the state.
23

Table 7. Economic impact of rural transit.

Impact Type

Employment Labor Income ($)

Direct Effect

75.2

908,018

Indirect Effect

753

17,059,947

Induced Effect

114.1

5,151,976

Total Effect

942.3

23,119,940

Note: All dollar amounts are expressed in 2017 dollars.

Value Added ($) 1,257,392 22,738,699 9,551,344
33,547,436

Output ($) 2,861,065 45,528,117 16,216,438
64,605,620

Table 8. Fiscal impact of rural transit.

Employee Compensation
($)

Proprietor Income ($)

Tax on Production
and Imports
($)

State and Local Taxes

6,464

0 1,498,376

Federal Taxes

2,219,271

149,786

189,795

Note: All dollar amounts are expressed in 2017 dollars.

Households ($)
627,494
1,659,474

Corporations ($)
47,927
395,395

Total ($)
2,180,261
4,613,721

Next, economic benefits resulting from operating costs and from capital costs were measured separately. Capital costs lead to a one-time infusion of money into the economy when expenses are incurred toward purchasing assets such as buses, vans, restocking inventories, etc. Capital spending, thus, results in the generation of direct, indirect, and induced output. On the other hand, operating expenses are incurred daily on inputs such as labor, materials, equipment, and services. These operating and maintenance expenses, thus, do not spur direct but indirect and induced economic activity. The NTD data used are available by the source of funding agency; however, data are not available on how the operating cost or the capital expenses were disbursed.

24

Benefits from Operating Costs Edrington et al. (2014) list four categories for transit agencies, which represent approximately 70 to 90 percent of a transit agency's operating costs. These include salaries and wages (about 50 percent), fringe benefits including health insurance (20 percent), services on maintenance costs (15 percent), and expenses on fuel and lubricants (15 percent). The research team assumed that most (i.e., 90 percent) operating expenses were incurred in the local area (Godavarthy et al. 2015). The average of the total annual operating costs for the three years was used to estimate their impact on the state's economy (see table 9).

Table 9. Economic impact of operation costs of rural transit.

Impact Type

Employment Labor Income ($)

Indirect Effect

742.4

16,415,201

Induced Effect

104.3

4,707,686

Total Effect

846.7

21,122,886

Note: All dollar amounts are expressed in 2017 dollars.

Value Added ($) 21,756,670 8,727,635 30,484,306

Output ($) 43,830,942 14,818,075 58,649,017

The indirect and induced effects of the operating costs led to more than 800 new jobs and $21,122,866 in labor income. This income was, in turn, spent by the workers on the consumption of goods and services, which led to a multiplier effect in terms of increasing output by $43,830,942 (indirect effect). This increase in output led to further economic activity in other sectors (induced effect) and generated an additional $14,818,075 in output. Thus, the total output effect was equal to $58,649,017. Therefore, every dollar spent on operating costs resulted in an economic benefit of $2.04.
Table 10 lists the top 10 sectors where the operating costs had the most impact in terms of jobs. Apart from the transit and local transportation where the most jobs were created
25

(694.4), new jobs were also created in insurance agencies, services to buildings, real estate, wholesale trade, etc.

Table 10. Top 10 sectors with highest number of jobs created from operation costs of rural transit.

Sector

Employment Labor Income ($)

Transit and ground passenger transportation

598.7

7,228,367

Local government passenger transit

50.7

3,373,759

Insurance

agencies, brokerages, and

13.2

969,670

related activities

Services to buildings

9.8

182,894

Real estate

8.1

161,036

Wholesale trade

7.6

668,225

Employment services

7.5

311,187

Management consulting services

7

595,716

Full-service restaurants

6.9

155,878

Limited-service restaurants

6.3

115,231

Note: All dollar amounts are expressed in 2017 dollars.

Value Added ($) 10,009,586 2,880,150
1,294,031
217,476 1,061,587 1,287,498
456,841 536,632 171,281 279,524

Output ($) 22,775,783
5,820,911
2,520,544
382,268 1,511,662 1,857,244
609,761 837,935 338,399 520,195

The fiscal impact of the increased economic activity is summarized in table 11. Operating costs generated $1.98 million in state and local tax revenue and $4.21 million in federal tax revenue. Most of the tax revenue at the state and local levels came from the production of goods and services. At the federal level, significant tax revenue was also generated from employee compensation and corporations. A dollar spent in operating costs resulted in $0.16 in tax revenue. The previous studies had found that operating costs resulted in tax revenue between $0.06 and $0.50.
26

Table 11. Fiscal impact of operation costs of rural transit.

Employee Compensation
($)

Proprietor Income ($)

Tax on Production
and Imports
($)

State and Local Taxes

5,929

0 1,357,362

Federal Taxes

2,035,512

134,057

171,933

Note: All dollar amounts are expressed in 2017 dollars.

Households ($)
573,128
1,515,698

Corporations ($)
42,952
354,350

Total ($)
1,979,371
4,211,550

Benefits from Capital Costs Averaging capital costs over three years reveals that $5,722,131 were spent by the rural transit system. Typically, a majority of transit agencies purchase their vehicles, fare collection systems, and communications and information systems from outside the local economy. Hence, Scenario 1, discussed here in detail, assumes 50 percent of capital costs were spent within the state. Different scenarios are analyzed by assuming 90 percent and 25 percent of capital costs spent within the state (in the following section, Benefits from Capital Costs: Different Scenarios). Table 12 compiles the estimates of the impact of this spending on the state economy.

Table 12. Economic impact of capital costs of rural transit: Scenario 1.

Impact Type

Employment Labor Income ($)

Direct Effect

75.2

908,018

Indirect Effect

10.6

644,746

Induced Effect

9.8

444,290

Total Effect

95.6

1,997,054

Note: All dollar amounts are expressed in 2017 dollars.

Value Added ($) 1,257,392 982,029 823,709 3,063,130

Output ($) 2,861,065 1,697,175 1,398,363 5,956,603

27

The direct effect of spending $2,861,065 was an increase in value added worth $1,257,392. Note that value added is a component of output and the two should not be added together. The direct effect also includes benefits from the creation of jobs, and for drivers, dispatchers, mechanics, etc. A total of 75.2 jobs (full-time/part-time) were created, and $908,018 were generated as labor income in the transit and ground transportation sector.
Similarly, the fraction of capital expenses spent within the state toward purchasing vehicles, equipment, maintaining inventories etc. has a multiplier effect in terms of generating more jobs and labor income. The indirect effects resulted from these are jobs created and labor income spent in industries that supply inputs to public transit, such as fuel, repairs, insurance, etc. The indirect effects led to the creation of an additional 10.6 jobs and generated $644,746 in labor income. The value added of the indirect output was equal to $982,029.
Induced economic activity resulted from the income generated through both the direct and indirect effects. When people who worked for the transit system or earned income by providing inputs to the transit agency spent their income, their spending helped create an additional 9.8 jobs in the economy. The induced output was worth $14,725,793, and the value added to the output was equal to $8,674,265. Adding the direct, indirect, and induced effects shows that the total economic benefit in terms of output is $5,956,603. This implies that for every dollar spent, the economic benefit resulted in $2.08.
The indirect and induced effects led to the creation of jobs mainly in the following industries: insurance agencies, services to buildings, maintenance and repair construction
28

of non-residential structures, employment services, management consulting services, real estate, and restaurants (see table 13).

Table 13. Top 10 sectors with highest number of jobs created from capital costs of rural transit: Scenario 1.

Sector

Employment Labor Income ($)

Transit and

ground passenger

75.3

transportation

909,248

Insurance

agencies, brokerages, and

1.6

118,180

related activities

Services to buildings

1.1

20,980

Employment services

0.8

34,281

Management consulting services

0.8

69,668

Real estate

0.8

15,989

Full-service restaurants

0.7

15,079

Maintenance and

repair construction of nonresidential

0.6

structures

35,002

Limited-service restaurants

0.6

10,986

Wholesale trade

0.6

49,877

Note: All dollar amounts are expressed in 2017 dollars.

Value Added ($) 1,259,094
157,712
24,947 50,326 62,758 105,401 16,569
48,802
26,650 96,100

Output ($) 2,864,940
307,195
43,850 67,172 97,995 150,088 32,735
100,047
49,596 138,626

Table 14 compiles the estimated impact of capital costs of rural transit on the economy in terms of tax revenues. The direct effect of spending $2,861,065 in rural transit led to $402,171 in federal taxes and $200,890 in local and state taxes. Thus, for every dollar spent on capital costs, $0.11 were received in terms of tax revenue. The literature shows that a dollar spent on capital costs led to $0.25$0.27 in tax revenues. A majority of federal tax

29

revenue was incurred as income tax on employee compensation, whereas a large share of the state tax revenue came from tax on production of goods and services.

Table 14. Impact of rural transit in terms of tax revenues: Scenario 1.

Employee Compensation
($)

Proprietor Income ($)

Tax on Production
and Imports
($)

State and

Local

535

Tax

0

141,014

Federal Tax

183,759

15,729

17,862

Note: All dollar amounts are expressed in 2017 dollars.

Households ($) 54,366
143,776

Corporation ($) 4,975
41,045

Total ($)
200,890
402,171

Benefits from Capital Costs: Different Scenarios
The previously discussed Scenario 1 assumes 50 percent of capital costs were spent within the state. This section considers two different scenarios and compares the extent to which economic benefits vary depending upon the assumptions made. Scenario 2 assumes that most of the capital costs (90 percent) were spent within the state, and Scenario 3 assumes the least, that is, only 25 percent of capital costs were spent within the state. Table 15 compares the estimated economic benefits from these different scenarios. The values in the table provide an upper and lower bound on the economic benefits from rural transit. Thus, direct spending on capital costs would result in the creation of 37 to 135 new jobs. Similarly, the total impact, that is, the sum of the direct, indirect, and induced effects, would range between $2.9 million and $10.7 million.

30

Table 15. Economic impact of capital costs of rural transit: Different scenarios.

Impact Type

Scenario 1 (50% spent in-state)
Employment Output ($)

Scenario 2 (90% spent in-state)
Employment Output ($)

Direct Effect

75.2 2,861,065

135.4 5,149,918

Indirect Effect

10.6 1,697,175

19.5 3,059,974

Induced Effect

9.8 1,398,363

18.1 2,518,569

Total Effect

95.6 5,956,603

173 10,728,461

Note: All dollar amounts are expressed in 2017 dollars.

Scenario 3 (25% spent in-state) Employment Output ($)
37.6 1,430,533

5.4

849,993

5

699,602

48 2,980,128

31

CHAPTER 7 SMALL URBAN TRANSIT: ECONOMIC COSTS
As noted previously, small urban transit agencies are defined as those receiving Section 5307 Urbanized Area Formula Program funding. Small urban areas typically have a population between 50,000 and 200,000. This study focused on nine counties that received funding under small urban transit programs (see table 1). Similar to the rural transit costs, data on operating and capital costs were compiled using the NTD. Table 16 and table 17 provide data on operating and capital costs, respectively, for small urban transit. Both costs are greater for small urban transit when compared to rural transit. Since these costs tend to vary from one year to another, data are compiled for FY 2016, FY 2017, and FY 2018 and then averaged over time. Table 24 provides data on average operating and capital costs for each of the nine counties.
Operating Costs Total operating costs for small urban transit in Georgia amounted to $52 million. These costs were much higher compared to the $3032 million in operating costs for rural transit. Over time, operating costs for small urban transit have tended to increase. A large share (i.e., 57 percent) of the operating costs were covered by funds from the local government. The federal government covered about 23 percent of the operating costs, while fare revenue covered about 17 percent of these costs.
32

Table 16. Sources of operating costs of small urban transit.

FY 2016 Costs ($) %

Fare Revenue

8,348,058 17.03

Local

27,634,370 56.37

State

778,487 1.59

Federal 11,571,958 23.61

Other

686,324 1.40

Total

49,019,197 100

Source: National Transit Database

FY 2017 Costs ($) %

9,213,790 17.43

27,915,078 904,701
13,351,522 1,477,924 52,863,015

52.81 1.71
25.26 2.80 100

FY 2018 Costs ($) %

9,250,478 17.12

32,958,095 1,063,237 10,604,741
148,083 54,024,634

61.01 1.97 19.63 0.27 100

Average Costs ($) %

8,937,442 17.20

29,502,514 915,475
11,842,740 770,777
51,968,949

56.77 1.76
22.79 1.48 100

Capital Costs
Similar to operating costs, capital costs also increased over time. Compared to rural transit's capital costs of about $5 million, capital costs for small urban transit were nearly three times greater and amounted to almost $14.5 million on average. A majority of capital costs (i.e., 74 percent) were provided by the federal funding agencies. The local government covered about 22 percent of the costs.7 The proportional share of funding from the federal government increased significantly, and that from local government declined over time. In fact, between FY 2016 and FY 2018, federal funds toward capital expenses of small urban transit more than doubled.

7 Fare revenue changed from $0 in FY 2016 and FY 2017 to $282,032 in FY 2018 because two of nine small urban transit agencies, the Albany Transit System ($178,815) and the Chatham Area Transit Authority Agency ($103,217), reported costs covered by fare revenues in FY 2018.
33

Table 17. Sources of capital costs of small urban transit.

FY 2016 Costs ($) %

Fare Revenue

0 0.00

Local

3,531,208 33.43

State

470,087 4.45

Federal 6,562,128 62.12

Total

10,563,423 100

Source: National Transit Database

FY 2017 Costs ($) %

0 0.00

2,199,904 707,125
9,957,879 12,864,908

17.10 5.50 77.40 100

FY 2018 Costs ($) %

282,032 1.42

3,670,583 413,287
15,554,304 19,920,206

18.43 2.07 78.08 100

Average Costs ($) %

94,011 0.65

3,133,898 530,166
10,691,437 14,449,512

21.69 3.67 73.99 100

34

CHAPTER 8 SMALL URBAN TRANSIT: ECONOMIC BENEFITS

This chapter summarizes the total benefits resulting from operational costs and capital costs combined. Similar to Scenario 1 in the rural transit study, the research team assumed that 90 percent of operating expenses and 50 percent of capital costs for small urban transit were spent within the state. All costs were averaged over time, for FY 2016, FY 2017, and FY 2018.
A total of $53,996,810 on average were spent annually on small urban transit, which is an estimated total benefit of almost $111 million in terms of increase in output. Thus, every dollar spent on small urban transit translates to $2.06 in economic benefits. The unit benefit is similar in magnitude to rural transit, though, of course, the total effect of small urban transit ($110,981,930; table 18) is much larger than the total effect of rural transit ($64,605,620; table 7).

Table 18. Economic impact of small urban transit.

Impact Type

Employment Labor Income ($)

Direct Effect

189.9

2,282,649

Indirect Effect

1,264.70

28,253,877

Induced Effect

199.2

8,754,939

Total Effect

1,653.80

39,291,465

Note: All dollar amounts are expressed in 2017 dollars.

Value Added ($) 3,160,932
37,768,106 16,230,976 57,160,014

Output ($) 7,224,756 76,059,167 27,698,007 110,981,930

In terms of employment, rural transit generated a total of 942 jobs, whereas small urban transit generated 1,653 jobs. In both rural and small urban transit, most jobs were created due to the indirect effect. The direct effect from transit leads to creation of jobs for drivers, dispatchers, mechanics, etc. The indirect effect is when jobs are created in sectors that

35

support the transit sector; for instance, jobs are created in industries that supply vehicles, equipment, fuel, insurance, etc. The labor income from the indirect effect of small urban transit (i.e., more than $28 million) helped create nearly 200 additional jobs and led to an additional $8 million in income. Table 19 lists the top 10 sectors where the operation costs had the most economic impact. Apart from the transit and local transportation where most jobs were created (1272.6), new jobs were also created in insurance agencies, services to buildings, real estate, wholesale trade, and restaurants.

Table 19. Top 10 sectors with highest number of jobs created from operation costs of small urban transit.

Sector

Employment Labor Income ($)

Transit and ground passenger transportation

1,188.10

14,013,501

Local government passenger transit

84.5

5,475,244

Insurance agencies, brokerages, and related activities

26.1

1,870,344

Services to buildings

19.1

349,480

Real estate

15.5

301,468

Employment services

14.7

591,067

Wholesale trade

14.1

1,209,554

Management consulting services

13.8

1,141,664

Full-service restaurants

13.2

290,812

Limited-service restaurants

12

214,576

Note: All dollar amounts are expressed in 2017 dollars.

Value Added ($) 19,405,400 4,674,171
2,495,988
415,560 1,987,353
867,721 2,330,501 1,028,433
319,549 520,513

Output ($) 44,353,778
9,783,908
4,892,337
737,740 2,826,378 1,170,991 3,410,546 1,612,578
630,768 967,812

Table 20 compiles the estimated impact of operational and capital costs of small urban transit on the economy in terms of tax revenues. Expenses on small urban transit resulted
36

in $2,180,261 in local and state taxes and $2,219,271 in federal taxes. Thus, for every dollar spent, $0.08 were received in terms of tax revenue. Most of the federal tax revenue was generated from labor income, whereas most of the state and local tax revenue resulted from sales tax on the output generated.

Table 20. Fiscal impact of small urban transit.

Employee Compensation
($)

Proprietor Income ($)

Tax on Production and Imports
($)

State and Local Taxes

6,464

0 1,498,376

Federal Taxes

2,219,271

149,786

189,795

Note: All dollar amounts are expressed in 2017 dollars.

Households ($)
627,494
1,659,474

Corporations ($)
47,927
395,395

Total ($)
2,180,261
2,219,271

37

CHAPTER 9 SUMMARY AND CONCLUSIONS
In this report, the researchers estimated the economic costs and benefits of rural and small urban transit in Georgia. Georgia has one of the largest networks of rural transit in the country, with more than 80 transit agencies providing service to 114 rural counties. On the other hand, small urban areas were fewer (only nine counties) but had larger populations (more than 50,000) and hence larger transit budgets. The rural transit system in Georgia operates as a demand-responsive bus service, whereas the small urban transit system provides both fixed-route and demand-responsive service.
Transit cost data were compiled from the National Transit Database. Since transit costs tend to vary from year to year, these included data for the most recent three years (FY 2016, FY 2017, and FY 2018) and used the average costs in the economic impact models. Operating costs include costs of labor, fringe benefits, materials and supplies, maintenance, office space, equipment, and administrative costs. For rural transit, a large share (more than 40 percent) of the operating costs were covered by federal funds via programs such as the Rural Formula Program (5311) and the Enhanced Mobility of Seniors and Individuals with Disabilities Program (5310). A large share (57 percent) of the operating costs for small urban transit were covered by funds from the local government. Capital costs cover investments in physical assets, small (e.g., computers) and large (e.g., buses, garages, and maintenance facilities). Typically, operating costs are spent within the economy, whereas capital costs are at least partially spent out-of-state. Economic benefits were estimated separately for both operating and capital costs and for rural and small urban transit systems.
38

The research team also estimated multiple scenarios, where 25, 50, and 90 percent of capital costs were spent within the state.
Using rigorous inputoutput models based on a social accounting table with nearly 500 sectors, the researchers estimated the impact of rural and small urban transit on the state's economy. The model provided estimates in terms of the direct, indirect, and induced effect of transit expenditures. A direct effect of a transit system is the production of output in terms of transport service, capital investment, and creation of jobs in the transportation section. The indirect and induced effects occur due to the multiplier effect. For instance, capital expenses spent within the state toward purchasing vehicles, equipment, etc. have a multiplier effect in terms of generating more jobs and labor income in industries that produce these vehicles and equipment. Total output increases indirectly when there is increased production of parts needed to manufacture buses and vans used in public transit. The indirect effect leads to a further increase in production, which is called the induced effects, when, for example, workers spend money on restaurants and groceries and help fuel further economic growth.
A total of $85.5 million were spent annually by rural and small urban transit systems in Georgia, assuming 90 percent of operating costs and 50 percent of capital costs were spent within the state. Table 21 shows the economic impact of rural and small urban transit combined. The economic impact analysis model estimated that this expenditure resulted in a total of $175.6 million in economic benefits. Of that total economic benefit, about $10.1 million were generated as a direct impact of the transit expenditure, about $121.6 million resulted from the indirect impact of transit expenditure, and the remaining $43.9 million were due to the induced impact of transit expenditure. Thus, for every dollar
39

invested in transit, $2.05 were generated in economic benefits. These estimates are consistent with the literature on transit benefits. In addition to the increase in total output, rural and small urban transit led to the creation of an estimated nearly 2,600 jobs annually within Georgia. Economic benefits from rural and small urban transit led to $5.9 million annually in state and local taxes and $12.5 million in federal taxes (see table 21).

Table 21. Economic impact of rural and small urban transit combined.

Impact Type

Employment Labor Income ($)

Direct Effect

265.1

3,190,667

Indirect Effect

2,017.7

45,313,824

Induced Effect

313.3

13,906,915

Total Effect

2,596

62,411,405

Note: All dollar amounts are expressed in 2017 dollars.

Value Added ($) 4,418,324 60,506,805 25,782,320
90,707,450

Output ($) 10,085,821 121,587,284 43,914,445 175,587,550

Table 22. Fiscal impact of rural and small urban transit combined.

Employee Compensation
($)

Proprietor Income ($)

Tax on Production
and Imports
($)

State and Local Taxes

17,428

0

4,055,138

Federal Taxes

5,983,762

406,830

513,653

Note: All dollar amounts are expressed in 2017 dollars.

Households ($)
1,694,042
4,480,073

Corporations ($)
130,122
1,073,497

Total ($)
5,896,730
12,457,815

The fact that the analysis is limited by the scope and extent of data available should be underscored. For instance, the National Transit Database that was used was available by the source of the funding agency. The research team did not have data on how the operating cost or the capital expenses were disbursed. Thus, the estimated economic benefits were based on certain assumptions. Furthermore, based on the data available, economic benefits

40

(e.g., increase in output and employment) have been estimated, but social benefits (e.g., savings in transportation costs) or environmental benefits (e.g., improved air quality) from rural/small urban transit have not been estimated. For instance, in order to estimate travel time cost savings, data on average trip length and cost of alternative trips are needed, or to estimate environmental benefits, data on public transit emission costs are needed, and so on (see Godavarthy et al. 2015). This level of detailed data is not available currently for rural and small urban transit in Georgia. If including the social and environmental benefits, then a much higher impact of investment in rural and small urban transit could be expected. The values in the study, thus, can be treated as conservative estimates of the overall impact of rural and small urban transit in Georgia. Finally, note that in 37 counties in Georgia, there is no transit service available. Volume 2 of this report discusses in detail this gap in current transit service in the state and offers some suggestions as to how to improve the transit coverage. If all counties in the state had transit available, the anticipated economic impact would definitely be of greater magnitude.
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APPENDIX

Table 23. Average operating and capital costs for rural transit by provider.

Counties Americus, City of Bacon County Baldwin County Banks County Bartow County Ben Hill County Berrien County Bleckley County Brantley County Brooks County Burke County Catoosa County Cedartown, City of Chattooga County Cherokee County Clay County Coastal Regional Commission Columbia County Commission Transit Cook County Coweta County Crawford County Crisp County Dade County Dawson County Dodge County Dooly County Elbert County Fannin County Forsyth County Gilmer County Glascock County Gordon County Greene County Commission Transit Habersham County

Average Operating Costs ($) 198,245 96,874 124,983 98,095 522,028 378,285 124,064 114,787 44,235 266,933 272,678 558,823 57,406 146,761 677,006 293,085 3,982,215 570,180 366,498 407,470 120,485 447,128 285,445 238,004 177,792 517,061 241,134 268,440 379,269 214,221 78,053 213,552 318,442 99,019

Average Capital Costs ($) 43,180 15,870 45,003 13,180 109,479 84,085 29,070 26,298 12,847 14,020 116,888 101,091 15,001 22,502 99,088 62,488 792,002 84,008 45,866 45,761 0 78,142 28,873 58,223 28,787 62,586 60,159 94,241 15,001 29,301 43,180 22,734 65,767 28,189

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Hall County Hancock County Haralson County Hart County Heard County Henry County Jackson County Jefferson County Jenkins County Jones County Lincoln County Lower Chattahoochee Regional Transit Authority Lowndes County Lumpkin County Macon County McDuffie County Commission Transit Morgan County Murray County Paulding County Peach County Pickens County Pierce County Pulaski County Putnam County Commission Transit Rabun County Richmond County + City of Augusta Southwest Georgia Regional Commission Social Circle Area Transit Talbot County Taliaferro County Board of Commissioners Taylor County Telfair County Thomas County Three Rivers Regional Commission Tift County Towns County Troup County Turner County Twiggs County Union County Walker County
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241,663 144,859 178,666 110,170 130,332 925,827 212,698 339,020 49,265 160,526 80,071 977,786 476,353 155,038 159,501 246,226 321,071 278,421 260,023 163,393 240,184 311,404 63,740 218,392 179,463 322,319 5,428,863 95,285 385,763
58,510 216,684 132,839 1,041,862 1,150,049 239,126 89,489 199,438 153,948 116,549 65,099 573,324

0 26,925 41,455 22,959 25,101 99,271 41,402 70,224 15,466 45,003
0 279,400 99,125 13,683 30,002 45,003 73,923 98,476 123,691 13,119 45,126 72,976
0 31,179 28,181 75,005 932,746 14,540 16,413
0 58,319 15,001 140,929 288,117 45,003 15,001 72,200 28,162 11,966 26,361 65,793

Ware County Warren County Commission Transit Wayne County Wheeler County Whitfield County W.T.S. Wilcox County Wilkes County Commission Transit Wilkinson County
Note: All costs are averaged over FY 2016, FY 2017, and FY 2018.

246,101 109,377 414,610 131,305 662,030 162,717 186,793 182,463

57,174 13,129 127,423 13,200 48,973 43,192 43,180 22,502

Table 24. Average operating and capital costs for small urban transit by cities.

City

County

Average Operating Costs ($)

Albany

Dougherty

3,530,165

Athens

Clarke

5,951,828

Augusta

Richmond

4,635,073

Columbus

Muscogee

4,299,441

Gainesville

Hall

1,371,701

Hinesville

Liberty

737,566

Macon

Bibb

6,599,451

Rome

Floyd

3,237,457

Savannah

Chatham

21,606,266

Note: All costs are averaged over FY 2016, FY 2017, and FY 2018.

Average Capital Costs ($) 2,465,218 1,489,590 4,782,389 2,351,677 48,466 45,167 575,545 671,991 2,019,470

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ACKNOWLEDGMENTS The authors thank the Georgia Department of Transportation (GDOT) for its support. The work conducted for this report was sponsored by the GDOT Office of Performance-based Management and Research and supported by the Intermodal Division under Research Project 18-14. The authors especially acknowledge the assistance provided by this group. The support and valuable inputs provided by Carol Comer, Nancy Cobb, Leigh Ann Trainer, Kaycee Mertz, Ryan Walker, Sunil Thapa, and Supriya Kamatkar in the course of this research project are highly appreciated. The authors also thank Xiaoyu Dong, who worked as a research assistant, and Sharon Dunn, who edited the report prior to submission.
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