TCB August 2025

The Hidden Economics of Transit Dependency 

Like most other older east coast cities, Greater Philadelphia's economic geography was shaped by its transit infrastructure. Our region's competitive advantages include a dense urban core, walkable neighborhoods, concentrated employment centers, and relatively affordable access to major job markets, all predicated on robust public transportation.  

Consider the mathematics of economic access enabled by SEPTA: A worker living in North Philadelphia can currently reach Center City in 25 minutes for $2.50. Under the new regime, if their route survives at all, that same trip will cost $2.90, a 16 percent increase, while potentially taking longer due to reduced frequency. For a worker making $15 per hour, the current roundtrip cost represents 20 minutes of work; under the new structure, it climbs to 23 minutes. This may seem marginal, but for households already stretched thin, these margins matter enormously. 

The ripple effects extend far beyond individual commuters. Prior to the COVID-19 pandemic’s devastating negative impact on transit ridership everywhere, approximately 10% percent of the overall Greater Philadelphia workforce relied on SEPTA for their primary commute, with roughly 25% of city residents using transit.  The proposed cuts will disproportionately affect routes serving lower income communities, potentially severing thousands of workers from job opportunities and forcing employers to reconsider location decisions that depend on transit accessible labor pools.  

The Fiscal Reality Behind the Crisis 

SEPTA's dilemma reflects a broader structural challenge facing transit agencies nationwide: the mismatch between twentieth century funding models and twenty-first century mobility demands. Like many other American transit systems, SEPTA depends heavily on farebox revenue, state subsidies, and federal grants, all of which have proven inadequate to maintain service levels while addressing deferred maintenance and system modernization needs. But our region’s local tax bases – municipalities and counties - kick in a much smaller share of SEPTA’s operating revenues than in Chicago or New York.  

For example, in the New York City metro, the Metropolitan Commuter Transportation Mobility Tax is levied on all employers with payrolls exceeding about $1.2 million a year, not only within New York’s five boroughs, but also within the seven surrounding NY counties that are served by the MTA’s vast transit network. The MCTMT is the largest revenue source in the MTA’s budget, generating about 44% of operating revenues a year. What is intriguing about NYC’s model is that it places the burden on the employer, the prime beneficiary of transit in a dense region like the NYC metro. While the legislation that created the MCTMT specifically prohibits employers from deducting the tax from workers’ paychecks, research suggests that in practice, the tax – which is graduated depending upon the size of a firm’s payroll liability and ranges from 0.115% to 0.895% - is passed through to the workers in the form of slightly lower wages.  Nevertheless, the economic value of a robust and reliable transit network greatly outweighs the slight cost to the individual.   

In Chicagoland, the Chicago Transit Authority is the beneficiary – to the tune of about $1 billion a year – of a regional sales tax dedicated to transit, administered by the Regional Transit Authority. This constitutes roughly half of the CTA’s operating budget.  

By contrast, SEPTA receives less than 10% of its funding from local sources, the vast bulk coming from the City of Philadelphia, which in FY2026 contributed $135 million to the operating budget – while the 4 collar counties combined provided less than $40 million. Research by Econsult and the Economy League indicates that the economic benefit to the region from SEPTA is substantial. 

While SEPTA management has generally done a pretty good job with scarce resources, with per-ride costs on par with NYC and well below Boston or Chicago, it is not blameless for the system’s current straits. Regional rails were on time only about 80% of the time, compared with 95% or better on the Long Island Railroad.  Reliability and consistency are keys to capturing and retaining ridership.   

In Pennsylvania deep political divides get played out in the annual budget, and state lawmakers have been extremely reluctant to either raise taxes or devise sustainable revenue streams for many if not most public goods like transit or schools. This is not simply a story of inadequate management or political failure, though both have played roles. It is fundamentally about the challenge of sustaining public goods that require consistent, predictable funding in a political environment that often prioritizes short term budget balancing over long term infrastructure investment. 

The Regional Economic Stakes 

The proposed SEPTA cuts arrive at a moment when Greater Philadelphia can least afford to undermine its competitive positioning. Our region has made remarkable progress over the past two decades, transforming from a post-industrial afterthought into a legitimate contender for major corporate relocations and expansions. Companies from Amazon to Comcast have chosen or seriously considered Philadelphia precisely because of assets like transit connectivity, urban density, and workforce accessibility. 

These advantages are not permanent. They require continuous investment and maintenance. A degraded transit system sends powerful signals to businesses, workers, and investors about a region's priorities and trajectory. Cities that have allowed their transit systems to deteriorate, such as Detroit, Cleveland, and other parts of the Rust Belt provide sobering examples of how transportation disinvestment can accelerate broader economic decline. 

Moreover, the timing could not be worse given broader economic uncertainties. With federal infrastructure funding under review, potential changes to federal transit support, and ongoing workforce challenges across industries, Greater Philadelphia needs to be strengthening, not weakening, its foundational infrastructure 

Solutioneering… 

While the immediate crisis demands urgent action, it also presents an opportunity to reimagine how we fund and deliver transit services. Other regions have pioneered innovative approaches that could inform Pennsylvania's response. 

Seattle's voter approved regional transit authority levies property taxes to fund major transit expansion. Denver created a multi county transportation authority with dedicated revenue streams. Even closer to home, New Jersey has experimented with public private partnerships and New York with congestion pricing to support transit operations. 

As we’ve argued previously in this column, one local solution to the dedicated funding problem might be to dedicate a portion of the City’s imminent municipal pension windfall to help catalyze the formation of a regional fund for SEPTA – assuming the surrounding counties and municipalities are willing to contribute their fair share.  Research indicates that suburban municipalities hosting SEPTA stations garner higher property tax ratables than those that do not, creating the basis for an argument that these municipalities, at the very least, ought to contribute to such a regional fund. Since PA state law preempts counties from taxing residents to support transit, it would have to be done by the municipalities themselves; a formula could be devised to ensure consistency and fairness. 

Other creative solutions include leveraging SEPTA’s real estate assets, like its massive parking lots, leasing them to developers to create mixed-use transit-oriented projects, like that being built by Alterra Property Group in Conshohocken; the 99-year lease is slated to generate $330 million for SEPTA.  

Other regions have increased ridership back close to pre-pandemic levels, by lowering fares and increasing service frequency, particularly on weekends, replacing working commuters with visitors seeking to enjoy urban cultural attractions.  SEPTA has already begun implementing the Key Advantage program, selling discounted passes in bulk to large organizations like universities and corporations, which provide them as an employee benefit.  

The current crisis also accelerates the need for SEPTA to embrace technological innovation. Dynamic routing, demand responsive services, and integrated mobility platforms could potentially deliver better service with existing resources. While technology cannot replace the fundamental need for adequate funding, it can help maximize the value of every dollar invested. 

The Path Forward 

SEPTA leadership has indicated that state funding could "minimize or reverse some of the cuts." This is not merely a request for additional subsidies; it is an appeal for recognition that public transit is critical public infrastructure, deserving the same priority as highways, bridges, and broadband networks.  SEPTA truly does drive Pennsylvania’s economy. 

The Economy League has long advocated for evidence-based approaches to regional challenges. The evidence here is clear: robust public transit generates economic returns that far exceed its operating costs through increased property values, reduced congestion, environmental benefits, and expanded access to employment and education opportunities. Studies consistently show that every dollar invested in public transit generates between three and five dollars in economic activity. 

The question is whether Pennsylvania's political leadership will recognize these returns before the damage becomes irreversible. Transit systems, like all networks, are subject to tipping points. Reduce service below critical thresholds, and ridership drops precipitously, creating a vicious cycle of reduced revenue and further cuts. 

A Call for Regional Leadership 

This crisis demands response at multiple levels. State legislators must recognize that transportation infrastructure, like education and public safety, requires sustained public investment. Regional business leaders must advocate for the transit connectivity that supports their operations and workforce needs. Local officials must work collaboratively rather than parochially to address challenges that cross municipal boundaries.

Most importantly, citizens must engage with the fundamental question: what kind of region do we want to be? One that maintains and expands the infrastructure that enables economic opportunity and environmental sustainability? Or one that allows short term fiscal pressures to undermine long term competitive advantages?

The SEPTA crisis is ultimately a test of Greater Philadelphia's commitment to its own success. We have spent decades building a reputation as a region that takes the long view, that invests in assets that pay dividends across generations. The coming weeks will reveal whether that reputation reflects enduring values or merely favorable circumstances. 

The Economy League stands ready to support data-driven solutions, facilitate regional dialogue, and advocate for policies that strengthen Greater Philadelphia's economic foundation. But the window for action is narrowing rapidly. The question is not whether we can afford to invest in transit, but whether we can afford not to.