TMG Insights

1. Urban & Regional Planning 2. Economics & Analysis

Economic Development: Invest in Transit


Houston’s Light Rail,

We at TMG have been working for months to statistically, economically or even anecdotally correlate good public transit to economic prosperity in a city.  Observationally, cities that support strong economies like New York, San Francisco, Seattle, Chicago, and Boston have a transit system with good coverage and high frequency.  It is unknown whether good transit attracts economic development, or if economic development demands good transit.  We are still working to develop a successful index to correlate these two factors. Here is what we do know:

Transit is an economic driver.

Investment in transit creates jobs.  The transit sector is capital and labor intensive and therefore has a great impact on job creation.  For every $1 billion in transit investments, 36,000 jobs are created in all industries.

Investment in transit boosts the economy.  For every $1 spent on transit, $4 is created in economic activity.

Increased economic activity increases tax revenue: directly through income tax and sales tax collections, and indirectly as demand increases throughout the economy.  Transit has the ability to impact tax revenue through both these channels:

  • Increased income tax collections as jobs are created
  • Increased sales tax collections as consumer spending increases.

As transit services are expanded, longer term economic development begins to take hold through transit oriented developments.

Investment in transit increases property values.  As transit expands or improves in an area, the private market responds with investment dollars. Investment in underdeveloped urban areas translates to new revenue streams from increased property value and sales tax revenue.  A recent American Public Transit Association (APTA) report notes: “Real estate – residential, commercial, or business – that is served by public transit is valued more highly by the public than similar properties not as well served by transit.”  A survey of previous research conducted by the Center for Transit Oriented Development in 2008 found that the premium we place on property near public transit can range from 18% for condominium units to 167% for retail property.

Source: Transit Oriented Development survey, Center for Transit Oriented Development, 2008

In today’s economic climate, municipalities, states and the federal government are seeking solutions for high unemployment, low consumer spending, and a decreasing tax base.  A lasting policy to invest in public transit could create the momentum our economy needs to implement a sustainable economic recovery.

In coming blogs, TMG staff will discuss the transit index we are developing and aim to correlate economic indicators such as gross domestic product, personal income, Fortune 500 companies, and employment levels in an urban community.

Contributed by:

Bonnie Garrigan

Senior Analyst, Economics  or  (504) 569-9239 x 29

The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.

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