Fitch Ratings-Chicago/New York-10 August 2022: The pandemic was a severe blow to US public transit systems, resulting in durable declines in ridership and pressures on operating budgets, Fitch Ratings says in its report U.S. Public Transit Faces Multi-Year Recovery. Hybrid and remote work fundamentally changed demand, with ridership facing a long recovery to a new normal that will require new sources of revenue or service reductions at the most fare-dependent agencies.
Public transit ridership was trending lower before the precipitous declines of the pandemic. Overall US ridership subsequently plummeted 53% in 2020 and remains around 50% below pre-pandemic levels.
The nation’s largest transit agencies previously were able to employ pricing power based on commuter demand for transportation to urban job centers but commuter volumes are unlikely to return to pre-pandemic levels. Our base case assumes ridership does not fully recover, although some agencies may exceed this expectation. Major fare-dependent agencies estimate ridership will recover to 70%–90% of pre-pandemic levels.
Transit agency financial performance in the pandemic and recovery varies by revenue structure. Transit systems that rely heavily on tax revenue experienced steady revenue growth, even with declines in ridership, primarily reflecting the growth in sales tax revenue and federal aid during the pandemic. Fare-dependent agencies, such as New York’s Metropolitan Transportation Authority (MTA) and Bay Area Rapid Transit (BART), lag sales tax-dependent agencies, such as Los Angeles County Metropolitan Transportation Authority (LA Metro).
Extraordinary federal aid as part of federal pandemic relief measures helped compensate for lost fare revenue, particularly at the most fare-dependent agencies. These agencies will face sizeable budget gaps when this aid runs out in the next few years unless they are able to adjust budgets based on new baseline levels of demand and fare revenue.
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The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.