Fitch Ratings: Failure to Invest in Transit Could Hurt the Whole Economy

One of the country’s leading financial ratings agencies is warning that if America doesn’t change how it invests in transit, the whole economy could suffer.

After decades of steady growth, vehicle miles driven has stagnated in recent years. Americans are driving no more total miles now than in 2004. Image: ##http://www.investing.com/analysis/vehicle-miles-driven:-another-population-adjusted-low-206969##Doug Short/Investing##
After decades of steady growth, vehicle miles driven has stagnated in recent years. Americans are driving no more total miles now than in 2004. Image: Doug Short/Investing

“Public transportation investment strategies will need to transform if trends toward increased multifamily housing, declines in driving, and increasing public transportation usage continue over the long run,” Fitch said.

In an article published March 12, Fitch says there are signs of a major shakeup in U.S. transportation. The ratings group points to trends away from driving among millennials and an uptick in transit use. Fitch also cites record-breaking levels of multi-family housing construction, which represented almost one-third of new housing starts last year.

Fitch writes:

In our view, the transportation needs of the next 50 years will be markedly different from those of the past 50 years. U.S. policymakers must begin adapting their current decisions to these future needs. If these trends persist and meaningful policy changes are not made, the risk to the public transportation system would have negative implications for the entire economy.

That’s a strong warning from one of the big three global ratings agencies. It comes as Congress hems and haws about how to fund the next transportation bill, and transit agencies are just beginning to recover from the painful cuts they had to make during the recession, when demand skyrocketed and resources plummeted.

The number of miles driven by Americans is hovering around 2004 levels, Fitch notes. In this environment, toll roads premised on traffic growth could lose money and require subsidies, the group writes. Tolling authorities in Pennsylvania and New Jersey are finding that out the hard way.

Saying, “the market has limited appetite for project risk when repayment is in question,” Fitch acknowledges the truth that roads don’t pay for themselves. While the group defends the need to support the interstate system by any means necessary, it admits that “in some cases stability will require the public subsidies that are common in many other developed countries.”

Filed Under: VMT

  • Herbaderbaskerpaderp

    What a stupid outlook. Do you really think if you dangled the keys to a car in front of the eyes of a 16-year-old that they will turn around and walk away from it? No! This notion that “millenials are driving less” is not by choice…it’s because there is less money and wealth to go around! Let’s not bullshit anyone here. Cars are an example of wealth concentration. Cars allow people to be independent of government assistance. If I have a car, I don’t have to rely on the gov. to provide me mass transit. By the way, Im 23. The real problem here is that we are teaching kids not to aspire to want more.

    “Hey Timmy…don’t aspire to save your money up and buy a car so you can take yourself where you need to go….Waste that money instead and then ask the government to give you mass transit….and don’t worry…we’ll just say that it’s because ‘you don’t want to drive.'”

    Fuck this bullshit communist outlook that we need to stop driving and stop living in private homes. Get on your bike, live in your gov-subsidized apartment, go to your gov-subsidized job that is within walking distance, and buy gov-approved merchandise we allow you to open in your community.

    How about this FITCH? Why don’t we encourage people to aspire to become independent, self-sufficient citizens of society? Have you ever thought that the problem is that people are growing lazier and don’t aspire to take care of themselves?

    No…you havent. You’re right there behind this communist agenda with the rest of our government. Why would I expect anything less from you than an anti-American outlook?

    Fucking morons.

  • Dave

    Hey troll, I hope you are enjoying your govt subsidized ROADS.

  • Wewilliewinkleman

    I don’t think Fitch did a very good job rating all those sub-prime mortgage securities either. And how much does Fitch get for rating government bonds for transportation work?

  • Whoa buddy. I’m not sure how encouraging people to spend less on transportation by using more efficient modes, leaving them with MORE money to spend on actual INVESTMENTS (home ownership, education, better health) is communist. It’s smart economics.

    In cities, cars are a barrier to success, not a path to it. That’s not true everywhere, but the idea that cars are freedom while transit is government dependency is laughable. All travel modes are subsidized and cross-subsidized in any number of ways, and people should be celebrated for choosing to use modes that improve their health and allow them to spend their hard-earned money on more important things than a constantly depreciating asset.

  • Walter Sobchak

    The decline in driving can also be explained in the aging of the population: as people age, they drive less, because it is dangerous to themselves (and others) for them to do so. The biggest cesspools of money for most transit agencies are giving subsidized rides to seniors, so seniors aren’t hostages in their car-centric homes.

    But since you said you’re 23, how much did your car cost? How much in gas, maintenance, wear and tear do you pay a month? And, how much do you pay for insurance? Or do mommy and daddy pay for you? You may be in for a rude awakening when you see how much money is wasted in vehicle ownership.

  • Dave Weckl

    Useless analysis and useless interpretation. Public transit affects regional, if not localized, economies. I would second how well Fitch rated the sub-prime mortgages and mortgage-backed securities. Good job Fitch! More meaningless analysis!

  • Andrew

    Cars allow people to be independent of government assistance. If I have a car, I don’t have to rely on the gov. to provide me mass transit.

    No, you don’t. Instead, you have to rely on the gov. to provide you roads.

    Fucking morons.

    Indeed.

  • Do you really think if you dangled the keys to a car in front of the eyes of a 16-year-old that they will turn around and walk away from it? No!

    In a culture that prioritizes owning a home in the suburbs and driving anywhere, that is a likely result. If I were to go to a Dutch 16 year old or a German 16 year old or even a Japanese 16 year old and do that, the response is likely to be more mundane.

    This notion that “millenials are driving less” is not by choice…it’s because there is less money and wealth to go around! Let’s not bullshit anyone here. Cars are an example of wealth concentration.

    That plays a part, the generation is also more environment contentious. If you think you can blame the “communist government” for less wealth, well you’re wrong, the decline in spread out wealth has much more to do corporatism pretending to be a free-market, but that’s another tale for a different time. As for “wealth concentration,” I know several places where I can get a pmv for relatively cheap. All I need is means to finance it at a low monthly rate or paying for it in a saved up lump sum. These are both achievable working minimum wage jobs. Sure the PMV won’t be the best but it will function.

    Cars allow people to be independent of government assistance. If I have a car, I don’t have to rely on the gov. to provide me mass transit

    Who pays for the roads and bridges, the salaries of the police who keep the roads safe, etc? I’ll give you a hint, it starts with the letter g and ends in “overment.”

    By the way, Im 23.

    I don’t understand the relevance, but it shows you still have a lot to learn about the world. Classes in poly-sci and econ 101 can only teach you so much.

    The real problem here is that we are teaching kids not to aspire to want more.

    Maybe kids are no longer aspiring to want more on an individualistic sense, but on a communal sense. They want to live in a good neighborhood with good neighbors and have the ability to not care about a constantly devaluing asset. Just because they don’t want a car doesn’t mean they don’t want more.

    Fuck this bullshit communist outlook that we need to stop driving and stop living in private homes. Get on your bike, live in your gov-subsidized apartment, go to your gov-subsidized job that is within walking distance, and buy gov-approved merchandise we allow you to open in your community.

    Well if you notice, this blog is focused on cities. And if you look at multiple studies you could see that people with short commutes are the happiest and most productive. Private housing is a huge driver of the American economy and will never go away because there will always be demand for it. I really don’t get where you’re getting the idea that everything will be “subsidized.” But I must ask, do you have any idea what communist means? You throw it about with no attachment to the actual ideas of communism. It’s like how Russians use the term Fascism and Fascist at any of their foes.

    Why don’t we encourage people to aspire to become independent, self-sufficient citizens of society? Have you ever thought that the problem is that people are growing lazier and don’t aspire to take care of themselves?

    So people are incapable of becoming independent citizens unless they have cars? So say someone who rents an apartment, owns a bike and rides mass transit. This someone goes to his job on wall-street via bike or mass transit. Is that person lazy and purely dependent on the government? Or is this person utilizing the freedom of choice in the options the government has provided? (streets for a bike, car, or bus or an impressive subway system)

    No…you haven’t. You’re right there behind this communist agenda with the rest of our government. Why would I expect anything less from you than an anti-American outlook?

    The American government is no where near communist, it’s slightly right of the global political spectrum. But then again, how is a social-democratic agenda (or in your words communism) anti-american? Depending on your interpretation, such a government could establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty all without violating the constitution.

  • Are you saying that the health of local economies and the national aren’t interrelated? The health of let’s say Cleveland has nothing to do with the health of the nation? I think that is plainly and obviously wrong.

  • rst1317

    i’m not sure why that’s plainly wrong nor right. A national economy is just the sum of it’s pieces.

    i’m not sure why Fitch is so dead set on the importance of transit. The most robust economies we have today are on the Great Plains ( http://www.sys-con.com/node/3031858 ). Odessa and Minot aren’t prospering because they have transit, they’re prospering because they have something to sell that others highly value.

    There are other things that come to mind that aren’t consonant with Fitch’s claims. For example, transit ridership fell in the Twin Cities again last year. Yet the Twin Cities GDP grew, it added jobs and has one of the most healthy labor participation rates in the country.

    Fitch doesn’t seem to realize that per capita use of transit in 2010 was only a few percent high than in 1960.

  • J_12

    Describing Fitch as “one of the country’s leading financial rating agencies” made me chuckle.

  • Bolwerk

    Their job is to evaluate risk. If they weren’t wrong sometimes, they wouldn’t be doing their jobs.

  • Bolwerk

    It’s plainly and obviously wrong given the most transit-depedent places also make many of the largest contributions to the national economy in proportion to their sizes. The inability to invest in it retards the local and regional economies of places like New York, San Francisco, Chicago, D.C., and Boston – probably the Twin Cities too, regardless of a discrete drop in demand.

    At this point, we could probably throw even throw newer cities like L.A., Austin, Dallas, and maybe even Houston and Atlanta on the list.

    If Fitch is wrong, it’s probably only because failure to invest in transit has already hurt the whole economy.

  • WoodyinNYC

    Last I read, one famous agency’s emails showed that it gave good ratings to companies that paid for good ratings. Maybe that’s your idea of a leading financial rating agency? Of course, they got away with it so maybe it does qualify.

  • WoodyinNYC

    You say, “Odessa and Minot aren’t prospering because they have transit, [but] because they have something to sell that others highly value.”

    What they have to sell is oil.

    Let’s not suggest it was a smart policy decision to locate where oil or gas would be found. That would be like congratulating the Koch Brothers for their hard work getting rich in the oil business, when they inherited their business from Daddy. LOL.

  • Bolwerk

    Well, the crowd is three. :-

  • Bolwerk

    Yes and no. They have a built-in conflict of interest, in that that lenders pay them to provide the service they provide.

    Hence the sub-prime problem the RWAs are complaining about.

  • TomD

    rst1317 says “transit ridership fell in the Twin Cities again last year”.

    The National Transit Database (NTD) doesn’t show this. While the 2013 figures aren’t yet available from NTD, Twin Cities transit ridership (number of unlinked trips) was up year-over-year from 2009 through 2012. So even if the 2013 ridership was down (and I don’t know that it is) it would not be down “again” as each of the prior years showed an increase over the year before.

  • dhymers

    “You’re right there behind this communist agenda with the rest of our government.”

    Red Scare much ?

    Question … was what Obama was doing with the Saudi’s this week “communist” ? … no, shoring up relations with the worlds most important oil producer with respect to excess capacity actually amounts to government support for the private automobile and the rest of the oil based economy, read “all of it” . You fucking moron.

  • rst1317

    APTA’s data showins Metro Transit ridership dropping

    http://www.apta.com/resources/statistics/Documents/2013-q4-ridership-APTA.pdf

  • rst1317

    That doesn’t add up though. Only a handful of metros have more than 10+% of jobs in their downtowns ( CBDs ). Transit use is negligible outside of commuting to downtowns. And even when it comes to downtowns, only about 1/4 of CBDs in the US have more than 20% of workers taking transit. OUtside of NYC and a couple other places, you could end transit and their would be little change.

  • TomD

    rst1317, even with the data you cited, I don’t see a long-term downward trend in Twin Cities transit ridership.

    In the data you cited, each of the 4 Twin Cities transit agencies provided more trips in 2013 than in 2012. Metro Transit (the biggest) was up 0.39% in 2013 (despite 2012 having an extra day)–81.4 million trips (in 2013) vs 81.1 million (in 2012).

    True, 4Q 2013 was slightly down from 4Q 2012 (by 0.20% overall for the 4 agencies listed), but 12-month numbers are much more indicative than shorter periods.

  • Bolwerk

    So what if it’s “negligible”? “NYC and a couple of other places” with transit are among the largest metropolitan economies in the USA, and typically contribute more per-capita too. Transit is valuable to the people who take it, and they contribute to the economy too. That’s still millions of people every day. It’s a safe bet those metro areas are typically relatively low-growth, despite the wealth they generate, because they can’t invest in the transit they need.

  • Andrew Dawson

    Why should some one be obligated to buy a car?

  • Andrew Dawson

    Teabaggeconomics, deliberately destroy railroads, then say that railroads don’t work! :$

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