North Carolina microtransit wins, with more flexibility and lower operating costs per passenger compared to fix route systems.
By Baruch Feigenbaum
The growth of microtransit in North Carolina has been a trending topic on both the right and the left. In The Carolina Journal, David Larsen discussed how “North Carolina (is) Leading a Public Transit Revolution,” while in The American Prospect Micah Morton Jones noted, “North Carolina Fuels a Microtransit Revolution.” Microtransit is an emerging transportation mode that can provide better service at an equivalent cost. North Carolina provides a good blueprint for how to implement such service.
For the past 35 years, North Carolina has provided state transit operating funding support for transit systems in each of the state’s 100 counties through the Rural Operating and Assistance Program (ROAP). The program can fund 100 percent of the cost of the service, but typically requires a local match.
The amount of funding is dictated by the General Assembly and changes each year. The funding supports operations only; new construction or capital funding is not eligible. Only rural areas are eligible, so the cities of Charlotte and Raleigh cannot apply. As a result of the comprehensive state program, many counties already have a pot of funding to operate transit.
The federal government is a source of capital funding, which can help buy vehicles. The program which provides the most direct funding is the Rural Areas Formula Grant program that provides capital, planning, and sometimes operating assistance to rural areas with fewer than 50,000 people.
Both of these programs are discretionary. Neither guarantees funding. Local transit agencies need well-designed, efficient programs to receive assistance. New microtransit services are the type of promising programs likely to receive funding.
The city of Wilson, located on the I-95 corridor in Eastern North Carolina, is a good example. During the COVID-19 pandemic, it eliminated fixed-route bus service, because ridership was extremely low and the farebox recovery rate was below 10 percent. Instead, it partnered with Via to provide on-demand van service for $2.50. The advantage of on-demand service is it picks riders up at their homes or workplaces instead of riders having to walk in the heat or rain to bus stops. While transit ridership has been declining or flat in other places, Wilson has seen a ridership increase of 300 percent.
Other cities besides Wilson have contracted with private providers. Having Via or another private provider operate the service can decrease costs and increase quality. In the past, one rule of thumb was that contracted service could be 75 percent of the cost of equivalent service operated in-house, or 90 percent of the cost of in-house operation for better service. With rapid inflation over the past two years, the advantages of contracting have decreased, but the city of Wilson shows that contracting can provide significantly better service at an equivalent cost, a win for riders and taxpayers.
In 2023, nearby Johnson County chose a different paratransit option. It developed Quick Ride, a rideshare network where passengers pay a flat $6.00 per ride. Anyone in the cities of Smithfield and Selma can order a ride for a destination in the service area. The service also offers connections to the airport and the Amtrak station. About 75 riders per day use the new system, which operates with a $600,000 budget.
Let us examine the financial aspects of the Quick Ride service; the cost is $21.93 per ride. With a ticket price of $6.00 per ride, the service requires a $15.93 subsidy. While that subsidy is high, other peer systems have a per-rider subsidy of $30-to-$40. Further, the system only has 75 daily riders. Moving forward, Quick Ride wants to expand service to the neighboring town of Davis, which should increase ridership. If riders can be increased to 150 the subsidy would decrease more than 50 percent.
Other jurisdictions in North Carolina have taken notice of the success of microtransit. Five other jurisdictions: Orange County, Morrisville, Wilmington, Elkin, and Wake County have started microtransit. Further, there are 13 other microtransit services that have recently launched or will be launching in the next 12 months. Some of these services will supplement existing fixed-route bus service or replace bus service in part of the service area.
One of the challenges North Carolina jurisdictions face is the stigma of riding the bus. Most choice riders, (those who have access to a vehicle), and even some transit-dependent riders, (those who do not have access to a vehicle), refused to ride the fixed-route bus service.
In many small towns, where folks tend to know each other, many residents do not want to be seen riding the bus. While this is a mindset that may need to change, for now on-demand transit systems, which are perceived as a more-premium option, have overcome the social stigma.
These new North Carolina services areas not about saving money but increasing service quality. Microtransit systems replace, and sometimes supplement, existing fixed-route service. However, with ridership increases of 30 percent to 300 percent, their per rider cost is much lower. Further, transit in smaller cities will always be subsidized. The key is prioritizing service for transit-dependent riders.
And by offering service 14-hours a day and every day but Sunday, microtransit operate, not just during peak commuting patterns, but also during off-peak hours when transit-dependent shift workers are more likely to travel. Jurisdictions in North Carolina have found a successful model for microtransit. Municipalities in other states would be wise to follow their lead.
Originally published by the Reason Foundation. Republished with permission.
For more Budget & Tax News.