Building Revenue Sources

Johnstown, Penn.

Josh Yoder

Director of Marketing and Planning

Cambria County Transit Authority (CamTran)

Revenue and funding. Two words that go hand in hand when talking about transit. In this day and age transit agencies from all over the country are looking at different outlets and avenues to increase revenue to help fund transit operations and programs throughout their respective organizations and CamTran is no exception.

Over the last five years, CamTran has seen a steady increase in transit advertising revenue which has helped with general operating expenses and in turn helps with cost recovery. Advertisers who choose to utilize CamTran buses as an advertising medium range from local non-profits to major corporations. Advertising agencies from all over the country have also realized that CamTran is a viable advertising medium and have proactively chose to work with CamTran to enhance their clients marketing campaigns and build their clients brand.

While the steady increase in advertising revenue over the last five years has helped, it has not been near enough to help with general operating expenses which continue to grow. Proactively, CamTran is in the process of exploring a variety of options that will open up new revenue streams which will ultimately help fund general operating expenses and help our cost recovery.

When discussing the various outlets that CamTran has available to use as advertising outlets a lot of outside the box ideas came to the forefront. Naming rights to our Transit Center as well as our Operations, Maintenance and Administrative facility were discussed and will be implemented in the future. The thought behind this is CamTran is extremely visible in the community and a partnership with other community friendly entities would build a stronger community presence for all parties involved, resulting in greater awareness for not only the company who purchases the naming rights but for CamTran who provides transportation services throughout Cambria County. Service vehicles play an important role in our organization and the idea of utilizing them as moving billboards was talked about and will be implemented in the future as well. Our service vehicles are on the road at various times throughout the day and are extremely visible which will be a draw for any advertiser looking to enhance their marketing campaign. Website advertising is something that has been around for quite some time and CamTran is ready to make the move to utilizing our website which is visited frequently as a viable advertising outlet. Another way CamTran is looking to increase revenue is to utilize our transition into the compressed natural gas (CNG) realm and build a revenue campaign around the conversion of our fleet to compressed natural gas. The thought is to build an all-inclusive package which incorporates naming rights, bus advertising, website advertising and sponsorships into a multi-year package. The end result will be a steady annualized revenue stream for CamTran coupled with a visible marketing campaign for the advertiser or advertisers who take advantage of a community based advertising medium.

CamTran is proactive and ready to do business to build a steady revenue stream in the future. The solid foundation of transit advertising that has been laid over the last five years will greatly help spring board our efforts into the future and we are fully prepared to be a revenue building model for other transit agencies throughout the country.

Albuquerque, N.M

Allyne Clarke

Advertising Sales Manager

Rio Metro Regional Transit District 

About three years ago, the Rio Metro Regional Transit District made the decision to start an in-house advertising program to help with operating costs. Its primary focus was to implement the program on the New Mexico Rail Runner Express. It required an understanding of what we had to offer to potential clients to help them expose their product or service to passengers. Once the various formats were identified, we had to create value by explaining the benefits and attributes of this type of out-of-home advertising. As the only commuter train in New Mexico, this form of media was new in this market which presented its own challenges and great opportunities. Keeping the program in-house allowed for 100 percent of the revenue to go to the general fund to help offset our transit operation expenses.

The most visible format of advertising with the Rail Runner is the 40-inch digital screens on the train. This platform allows a static ad or a video (no audio) to be displayed on all 44 screens (two per car) simultaneously. In addition, posters, in various sizes, can be displayed at five different locations inside each car. We took it a step further and captured the attention of passengers at the stations by displaying large posters at each of the 15 kiosks and on the windscreens. Sold individually or in combination, these formats have given various businesses the unique opportunity to reach the captive audience on and off the train.

As the advertising program continued to grow, multi-media integrated solutions were introduced to help generate additional revenue. This is done by presenting the main product along with digital and social media options. Banner ads on our website give clients another opportunity to engage our on-line users. Although challenging to charge for a Facebook presence, the value perceived by clients to reach the Rail Runner’s 22,000-plus fans has added weight to an overall advertising campaign.

From time to time, we receive a client request for a special train schedule to a major event taking place along the corridor. Because the Rail Runner is a small system, we are able to make some schedule changes to accommodate this. The additional cost to provide this service is paid by the client/organization. Individuals can also rent a train car for a special occasion, such as a wedding or a birthday party.

The Rio Metro RTD operates a small fleet of buses in two surrounding counties. This has allowed for external advertising to be sold on a limited basis and provides another source of revenue.

The New Mexico Rail Runner Express partnered with a vendor to sell its merchandise on-line and at two local stores. The contract includes a Rail Runner merchandise trailer which is set-up at various events (e.g., the Albuquerque International Balloon Fiesta and the Rail Runner Bike Tour). The revenue share goes towards operations.

Finally, the film industry in New Mexico is booming. The commuter train and the Rail Runner logo (a roadrunner) on the side of the train have become symbolic of the state. Several television and movie productions have been filmed on the train. This has become a very viable way to gain revenue for our transit operations and its programs.

Washington, D.C.

Nathan M. Macek, AICP

Principal Consultant and Manager, Transit Project Development and Finance

WSP | Parsons Brinckerhoff

Transit agencies are pursuing a number of creative approaches to fund operations and programs. Traditional approaches to funding transit — including sales taxes, property taxes, and fuel taxes — continue to provide the preponderance of revenue for U.S. transit agencies. However, alternative sources are increasingly being relied upon to augment revenues generated by traditional sources and match federal grants. Options include value capture, parking revenues, and toll revenues. Let’s consider these approaches and criteria for evaluating new funding sources.

Value capture is an approach that ties project funding to benefits that accrue to property owners from transportation improvements. It includes special assessments, tax increment financing, and developer contributions. This approach is advancing the Potomac Yard Metrorail Station in Alexandria, Va., an infill station along the Washington Metro’s Yellow and Blue lines. Value capture is also providing a significant share of the $2.4 billion extension of the 7 Line of the New York City Subway, as well as the $1.9 billion Phase 1 cost of the Transbay Transit Center in San Francisco.

Parking revenues collected on-street and at city-owned lots and garages subsidize operations of the San Francisco Municipal Transportation Agency, including Muni bus and rail services. Several cities — including Oakland, Philadelphia, Seattle, and Chicago — tax commercial parking lots in the central business district. Sometimes these taxes are charged per space, while other times they are charged as a percentage of gross parking revenues. There is a strong nexus between increasing the cost of parking to fund transit alternatives to driving.

Toll revenues have long provided revenue for transit operations in New York City, including Port Authority Trans-Hudson (PATH) trains operated by the Port Authority of New York and New Jersey, and Triborough Bridge and Tunnel Authority toll revenues for Metropolitan Transportation Authority transit services. More recently, the Metropolitan Washington Airports Authority applied toll revenue to fund a significant share of the Metrorail Silver Line extension in Northern Virginia. In each case, the toll revenues support transit service in corridors parallel to toll facilities and provide an alternative to paying the toll.

Evaluation Criteria: project sponsors should consider a number factors to review and select funding sources. Revenue yield and growth potential stand out as top criteria — if a funding source doesn’t provide much revenue or isn’t likely to grow over time, why bother? Another considerations is the nature of approvals required to implement the source. For example, is voter or state legislative approval required to enable it? Sponsors should also consider whether the funding source can be easily administered, because it can be much easier to piggyback on an existing mechanism than to create one from scratch. Other considerations include equity, nexus between contributors and beneficiaries, and volatility of the proposed funding source.

In most cases, no single source will stand out in all categories, so sponsors must trade-off between criteria to select an optimal funding source. But as the examples above illustrate, agencies across the country have succeeded in implementing alternative revenue sources to deliver new transit projects and services.

Washington, D.C.

Jose Bustamante

National Director of Transit & Rail


Today governments and local authorities across the country, faced with increasing demands on their resources, are under persistent and growing pressure to justify value from public transit investments. Often times, privatization and alternative sources for funding seem appealing to people across many metropolitan areas and public-private-partnership (P3) initiatives, yielding little or no success, continue to be the subject of conversation at multiple levels of government. Whether or not one agrees or disagrees with the feasibility of implementing P3’s in the transit world, all of us can agree on the fact that public transit operators need to find alternative funding sources for capital investments and operations.

Historically, public transportation funding sources have included fares, federal grants, state and local general funds, property taxes, sales taxes, fuel taxes, parking pricing and levies, advertising rights and station rents. Some conservatives may argue that some of these taxes and fees are burdensome and regressive; however, if history serves us well, the past twenty years have demonstrated that communities across the country are willing to tax themselves as long as the benefits of transit investments are clear. To that end, many of the successful transit stories across the country over the past couple of decades repeatedly point to referendums where people have chosen to fund public transportation initiatives in an effort to alleviate congestion and create a better quality of life for their communities.

With this in mind and realizing that even in the best economic climate funding sources for transit are likely to be limited, it appears that transit funding for the 21st Century must revolve around a strong federal funding program as the backbone, regional and local levies as well as tangible incentives for private investment.

In regards to federal funding, this is perhaps the most crucial part for transit funding as it lays the foundation for every other part of an effective funding program. It is not realistic to expect states and local jurisdictions to do it all alone. A reliable and well-defined federal program would introduce much needed stability and predictability for the creation of a sustainable long-term transit program. The federal government needs to include clear incentives for states and local jurisdictions to become recipients and good stewards of federal funds and provide a strong and reliable Grants Program including an Infrastructure Bank to allow for the efficient and timely implementation of transit investments.

Regarding levies and incentives, communities across the country are facing different challenges and, in some cases, levies are just not attractive for a variety of reasons, including competing priorities, regional economic drivers and political climate. This said, those communities committed to sustainable place making have long realized that they must act and take the initiative when it comes to transit investment and along the way ascertain the benefits of federal funds. This pattern of behavior will continue and federal, state and local funding programs must provide clear incentives for private investment in an effort to supplement public funds.

Arlington, Va.

Kelley Coyner

Executive Director

Northern Virginia Transportation Commission

Virginia understands that transit connects business and riders to economic opportunity. Beginning in 2013, the legislature provided new sources of revenue for regional roadway and transit projects. Though helpful, those funds are not enough. Necessity is the mother of invention when it comes to transit funding in our region. Innovative approaches, novel approaches – such as Interstate tolling, value capture, infrastructure bank loans, and public-private partnerships (P3) – are gaining ground.

Tolls from managed lanes on Interstate 66 inside the Capital Beltway, one of the nation’s most congested highways, will fund multimodal projects directly benefitting those who travel the corridor. Under a planned partnership with the Virginia Department of Transportation (VDOT), the Northern Virginia Transportation Commission (NVTC) will use excess revenues to fund projects, identified through a competitive process that will move more people through the corridor with greater reliability. Revenues, estimated at $10 million in the first year, will rise over time as the debt from tolling infrastructure is retired.

On I-66 west of the Capital Beltway, the Commonwealth is exploring a P3 tolling arrangement. In scoping the $2.1 billion project, VDOT has included the construction and operation of the managed lane facility as well as support for transportation demand management and transit.

The Commonwealth’s ability to toll I-66 stems from its acceptance into the Federal Highway Administration’s Value Pricing Pilot Program, which is examining whether and to what extent roadway congestion may be reduced through application of congestion pricing strategies.

One of the region’s more successful transit-financing tools is value capture, which taps the growth in property taxes due to proximity to transit. Fairfax and Loudoun counties have used the approach to extend Metrorail along the Dulles Airport corridor. To help fund Phase 1 of the Silver Line, Fairfax established a special tax district that included commercial and industrial properties around the planned stations, all of which were in the county. The tax rate was $0.22 per $100 of value. A similar approach is being used by both counties to help cover the costs of Phase 2.

Value capture, as well as a loan from Virginia’s Infrastructure Bank, are part of the City of Alexandria’s package to finance the Potomac Yard Station, which will be situated along Metrorail’s Yellow and Blue lines. In January, the Commonwealth Transportation Board approved a $50 million loan to jump start the project. The 30-year loan locks in an interest rate of 2.17 percent, lower than that of municipal bonds. No interest or principal payments are required until four and one-half years after contract completion. That grace period will allow the city to begin collecting revenue from new development near the station before having to repay the loan. Alexandria predicts that development around Potomac Yard will result in 26,000 new jobs within one-quarter mile and 13,000 new residents within one-half mile of the station.

Transit is thriving in Northern Virginia, in large part due to innovative approaches to funding and financing. Creative solutions, such as these, ensure that the region remains a thriving and mobile place to live, work and play.

Bethesda, Md.

Sasha Page

Senior Vice President

IMG Rebel

While transit agencies are enjoying a resurgence in ridership, they face continued funding challenges. Traditional revenue sources, such as federal grants and sales taxes, remain flat or are declining. Many agencies therefore are seeking alternative revenue sources, including increased commercialization at stations and value-capture approaches — inviting new guests to the table to contribute to and partake in transit’s Thanksgiving dinner.

To better understand this, I have classified transit revenues into “direct” and “other” and “traditional” and “innovative” as shown in the table.

Direct System Revenues Other Revenue Sources
Traditional • Farebox
• Non-farebox:
o Traditional advertising
o Parking • State/Local taxes
o Sales and fuel
o Other
• State and federal grants
Alternative • Station-related:
o Retail Concessions
o Innovative advertising
o Air rights
• Naming rights • Value-capture:
o Joint development
o Assessment districts
o Tax increment finance
o Impact fees
• Parking surcharges
• Tolls

Direct system revenues are fares and parking charges related to using the system. They usually cover only a portion of operating costs. Other revenue sources include sales or gas or grants; some agencies receive hotel or vehicle registration taxes. These sources are not likely to grow and can be politically controversial.

Agencies have experimented for years with increased commercialization at union stations, including food courts and shops. Now, they offer the conveniences of coffee shops, dry cleaning, and ATMs at smaller stations, as well.

Some agencies, like the Washington Metropolitan Area Transit Authority, now allow “domination” advertising displaying messages on every media space within a station—you often experience this when Congress is debating certain issues. Improved bus shelter advertising also has increased revenues.

Finally, agencies in Cleveland and San Diego have demonstrated that there is a market for naming rights to stations and entire lines.

While these direct, alternative revenue sources add to the bottom line, they only increase revenues by a couple of percentage points. What can really make a difference—covering as much 20 percent to 30 percent of a project’s capital costs— are value capture techniques. When well-planned, these leverage real estate at or around stations and lines, including:

  • Joint development—when public entities provide land to support station developments
  • Assessment districts—property tax zones around a station or an alignment, with some or all real estate uses paying increased property taxes
  • Tax increment financing—also using special assessment zone, in which the increases in property taxes resulting from the new transit service accrue to the agency
  • Parking surcharges—additional fees paying for nearby transit, as in Portland’s streetcar

Some agencies have also sought financial support from nearby toll agencies, which gain environmental and political benefits from supporting transit.

Alas, transit agencies must view their search for revenue sources as they do their Thanksgiving meal — each family and friend must contribute and, increasingly, new guests need to be invited to share and share alike in transit’s harvest.