SIC 4111

This industry consists of establishments primarily engaged in furnishing local and suburban mass passenger transportation over regular routes and on regular schedules, with operations confined principally to a municipality, contiguous municipalities, or a municipality and its suburban areas. Also included in this industry are establishments primarily engaged in furnishing passenger transportation by automobile, bus, or rail to, from, or between airports or rail terminals, over regular routes, and those providing bus and rail commuter services.

NAICS Code(s)

485111 (Mixed Mode Transit Systems)

485112 (Commuter Rail Systems)

485113 (Bus and Motor Vehicle Transit Systems)

485119 (Other Urban Transit Systems)

485999 (All Other Transit and Ground Passenger Transportation)

Industry Snapshot

Despite America's complaints of traffic congestion, pollution, gasoline prices, and lack of available parking, the truth is that Americans love their automobiles. However, as highway congestion continues to increase, improving and expanding mass transit systems remains on the agendas of most major metropolitan areas. By the beginning of the 2000s, Americans were spending three times as many hours idling in traffic as they did in 1982. Slowly, traffic is building on mass transit. In 2001, 9.5 million people rode on public transportation, setting a record for the sixth consecutive year. From 1996 to 2001 public transportation travel increased by 23 percent.

The sheer convenience of a personal automobile appears to be one of the biggest obstacles to the appeal of public transit. While most transit systems are intended to alleviate "rush hour" traffic associated with commutes to and from work, the truth is that almost 40 percent of morning traffic, and a clear 60 percent of afternoon rush hour traffic, is not even work related. Moreover, most transit systems were designed to serve urban metropolises and their suburbs, but only 19 percent of all commuters live in suburbs while working in the central cities.

For years, the mass transit industry had carried the stigma of the "1 percent argument," the system would service only 1 percent of all trips made by persons. The argument has been close to reality: light-rail systems are used by only 5 percent of commuters. Public transit in general has historically served a captive clientele: persons without driver's licenses or without vehicles, comprising about 70 percent of all riders, according to the National Urban Transit Institute at the Center for Urban Transportation Research. Ultimately, government subsidies to maintain the failed systems were averaging almost $10 dollars per one-way passenger and, in cities like Los Angeles, ran as high as $40 dollars per commuter rail trip.

But all is not for naught. As the twenty-first century began, the statistical wake-up calls urged cities and policy-makers to shift focus. Instead of trying to increase ridership with billion-dollar subsidies, they needed to develop other innovative transportation solutions. As a result, the industry has been paving its way toward an effective and appealing solution to ease public transportation concerns.

Organization and Structure

Passenger transit is considered an essential public service in the United States. As such, large sums of government financial assistance are pumped into transit systems throughout the country every year. Since World War II, private transit companies have been converted into public enterprises on a huge scale. This trend was facilitated by the passage of the Urban Mass Transit Act of 1964. This act was created largely as a measure to save mass transit from disappearing, since the postwar rise in automobile use had pushed many transit companies into insolvency. By 1990, public transit systems accounted for 86 percent of the industry's vehicles, 94 percent of its vehicle miles operated, and 94 percent of its unlinked passenger trips.

Transit Modes. Local and suburban passenger transit includes several different transportation modes. The most common mode found in the United States is the motorbus, which sees heavy use throughout the country. In large cities, heavy rail systems, which generally means subways and elevated rails, are also common. Commuter trains, light rails, and trolleys are also part of the local transit network. This industry also includes vanpools, airport shuttles, and other transportation to transit terminals, provided they run over regular routes on fixed schedules.

Distribution. Obviously, the need for transit grows with population size. In general, smaller urban areas use more buses and vanpools, while rail systems are found primarily in only the largest cities and their metropolitan areas. More than half of the nation's road transit systems are located in urbanized areas with populations under 50,000. Of the 20 all-rail transit systems in the United States, 15 are in cities with populations in excess of two million. California and New York have the most transit systems in operation, with each state containing 362 systems. Texas, with 238, is the only other state with more than 200 transit operations.

Organizations. The American Public Transit Association (APTA) is an organization of mass transit operators in the United States and Canada. Based in Washington, the APTA has more than 1,000 members. The APTA is generally considered the definitive source of transit information in the United States. Its members include organizations involved in every facet of mass transit, including construction, design, financing, planning, and supplying. The APTA was created in 1974 upon the merger of the American Transit Association (ATA), founded in 1882 as the American Electric Railway Association, and the Institute for Rapid Transit (IRT). The federal agency that oversees the industry is the Urban Mass Transit Administration (UMTA), an arm of the U.S. Department of Transportation.

Background and Development

Urban mass transit in the United States began to appear in the early part of the nineteenth century. In 1827, a horse-drawn stagecoach line began operating in Manhattan. Designed and planned by Abraham Brower, the line started out as a single 12-passenger vehicle, built by the coach-making company Wade & Leverich, running up and down Broadway. Two years later, Ephraim Dodge followed suit in Boston. Meanwhile, a more comfortable vehicle called an omnibus was gaining popularity on the streets of London and Paris. Brower took notice of the omnibus' success in Europe and, within four years of their New York introduction, over 100 omnibuses were rolling on New York's grid of streets. By 1844, omnibus service was also available in Philadelphia, Boston, and Baltimore.

Beginnings of Rail Service. At the same time that road transit was developing in the United States, street railway lines were making their debut. In 1832 John Mason, president of the Chemical Bank, founded the New York and Harlem Railroad, which initially ran along the Bowery from Prince Street to 14th Street, and eventually stretched all the way to Harlem. New Orleans launched a similar streetcar line in 1835, but this mode of transit did not really catch on until the 1850s, when Brooklyn, Cambridge, Philadelphia, Baltimore, Pittsburgh, Cincinnati, and Chicago all had horse-drawn rail lines built.

By 1882, more than 400 street railway companies were in business in the United States, with a total capital investment of $150 million. Those companies operated 18,000 streetcars and owned 100,000 horses or mules. Approximately 1.2 billion passengers were riding in rail-cars annually. That year, the American Street Railway Association was formed in Boston as a nationwide trade organization.

The first successful cable-powered transit line began operating in San Francisco in 1873. Cable cars spread across the country more quickly than horse cars had, and by 1883, cable lines were operating in Chicago, Philadelphia, and New York. The New York line included a route across the newly built Brooklyn Bridge. Over nine million passengers rode cable cars across the bridge in the cable line's first year of operation. In 1888, the first successful electric-powered street railway line was launched in Richmond, Virginia. Powered by a small, stationary copper wire, this line quickly made cable cars—with their cumbersome systems of pulleys, wheels, and underground vaults—obsolete.

The next major development in urban transit was the elevated rail. Although elevated lines had popped up in New York throughout the second half of the nineteenth century, it was not until financier Jay Gould took them over and combined them into a single entity, the Manhattan Railway, that the "els" became an important transit system. By 1893, the New York els carried 500,000 passengers a day. Steam powered elevated lines also appeared before the turn of the century in Kansas City, Missouri and Sioux City, Iowa, but these ventures were short lived. The Chicago "L" opened in 1892, and it was there that the first electric powered elevated rail was unveiled in 1895.

Ground was broken in 1900 for the nation's first subway system, New York's Interborough Rapid Transit (IRT). On the system's first day of operation in October of 1904, 150,000 passengers paid five cents each to ride the new trains. The IRT quickly grew to resemble the sprawling system it is today.

The period between World War I and World War II was the golden age of the trolley. Trolleys were operating in virtually every city in the United States by 1917, covering 45,000 miles of track. By the mid-1920s, however, ridership had already begun to decline, largely due to competition from gasoline powered buses and the emerging automobile. The trolley industry was saved by the development of the PCC car, named for the Electric Railway Presidents' Conference Committee that had spawned its design. The PCC car—lighter, more comfortable, and better performing than previous streetcars—was a major success, and revived streetcar business through the 1930s and early 1940s. After World War II, however, trolley ridership tailed off permanently.

Shift to Public Sector. The huge surge in the use of automobiles in the postwar era made it extremely difficult for transit companies to operate at a profit. In order for urban transit to survive, a shift from private to public ownership of many major systems became necessary. Under public control, transit systems were expected only to cover operating expenses, such as salaries and routine maintenance, through passenger fares. Capital expenses, such as facility construction, could be met through bond issues or taxation. New York's subway companies and Cleveland's transit were taken over by government agencies as early as 1940 and 1942. Chicago and Boston followed in 1947.

Rise of Buses. Another postwar trend was the shift from streetcars to buses as the main form of surface transit. By 1960, buses had an annual ridership of 6.5 billion, compared to 463 million streetcar passengers. This transition was assisted by the actions of companies like National City Lines, a transit holding company whose standard procedure was to absorb smaller street rail companies and quickly convert them into motorized bus operations. In 1964, Congress passed the Urban Mass Transit Act, creating a role for the federal government in ensuring the survival of local transit.

Ridership Decline. The decline in transit ridership eased a bit in the early 1970s, as concerns about energy consumption and environmental issues arose. One result of this modest resurgence was the development of light rail transit (LRT), which first appeared in the form of rehabilitation projects on old trolley lines. After successful LRT systems were launched in Canada in the late 1970s, LRT lines began operating in San Diego in 1981, Buffalo in 1984, and Portland, Oregon in 1986. Several other cities have built LRT systems since then.

In the United States in the mid-1990s, there were about 6,000 transit systems in operation. Those systems had active fleets containing 118,000 vehicles. Motorbuses made up the largest portion of transit vehicles, numbering 67,000. Ten thousand heavy rail cars and 4,500 commuter rail cars comprised another sizeable share. In 1995, the transit industry had operating funds of $17.6 billion. Nearly half of this revenue was in the form of government assistance from local, state, or federal sources. Passenger fares accounted for about 40 percent of total revenue, just more than $6 billion in 1995. Of the 8.4 billion trips taken on transit in 1994, 5.4 billion were made on buses and 2.7 were made by rail.

Despite the small rebound in the popularity of mass transit that took place in the 1970s, Americans were using it at a lower rate than ever before in the mid-1990s. Only about 5 percent of commuting was done via public transit systems, down from 9 percent in 1970. The exception to this trend was the increased use of vanpools, airport shuttles, and other smaller, nonpublic transit designed for special use.

Government Funding. Since 1974, nearly $70 billion in federal funds have been pumped into the nation's public transit systems. Although federal spending on local transit tailed off somewhat during the Reagan and Bush presidencies, this was offset by increases in local and state funding. In addition, the Intermodal Surface Transportation Efficiency Act of 1991 authorized $31 billion in federal spending from 1993 through 1997.

Despite this huge outlay of money, there is little evidence to suggest that riders are choosing transit systems over their cars. In some cases, newly built rail systems are merely drawing passengers from existing bus routes. Several new systems, such as Miami's $1.2 billion, 21-mile rail system, are attracting fewer passengers than were projected at higher than predicted costs. In 1989, Miami's system drew only 15 percent of its projected ridership and cost triple the forecast amount per car to run. A trolley system in Los Angeles cost $700 million more to construct than was projected and ran slower than the bus routes it was designed to replace.

In 1998, almost 8.7 billion persons used public transit at least once, an increase of 4.6 percent from 1997. Buses carried the largest number, approximately 5.2 billion in 1998. Heavy rail carried 2.6 billion riders, light rail had 278.8 million riders, and commuter rails carried 378.6 million. The trolley buses reported a loss, although they still carried 117.4 million passengers in 1998. All in all, 1998 was the third consecutive year that public transit ridership increased (by almost the same percent in 1997).

Light rail use increased in Portland, San Diego, Baltimore, Dallas, Denver, Boston, Los Angeles, St. Louis, and Sacramento in 1998. Philadelphia and Pittsburgh reported decreases, as did Buffalo, New York. During the same year, commuter rail systems increased their passenger numbers in Boston, Los Angeles, and North San Diego County in California. Tri-Rail suffered a 6.8 percent loss.

With an eye toward the future, public-private partnerships in the public transportation industry are increasingly common. For example, California's Route 91 express lanes in busy Orange County were converted to a fully automated toll road, complete with a toll-free "three " lane for car-pools. The project represented a partnership between the California Department of Transportation (CALTRANS) and a consortium of private companies, including one French firm. CALTRANS saved the $130 million construction cost, in return for a 30-year lease to the companies, to build and operate the toll road. The 10-mile, four-lane toll road opened in December 1995, but as of January 1998 was losing money. Even with $3.20 tolls at peak hours, traffic congestion continued during rush hour, and the revenue loss was attributed to the car pool lanes.

Current Conditions

In 2001 public transportation received $11.4 billion in capital from all funding sources. Of federal funds, 44 percent was designated for bus-related expenditures, 25 percent for fixed guideway modernization, 18 percent for new start transit projects, and 3 percent for planning. Operating expenses totaled $23.5 billion in 2001: salaries, wages, and benefits, 69 percent; purchased transportation, 13 percent; fuel and supplies, 10 percent; and other expenses, 8 percent.

Just at a time when mass transit was receiving increased attention and use, the economic crunch of the early 2000s hit. The result of the sluggish economy was a cutback in revenues available for the transportation infrastructure. For example, although capital spending on rail transit is expected to hold steady at $6.0 billion ($2.85 billion for heavy rail, $1.78 billion for commuter rail, and $1.25 billion for light rail) in 2003, new projects could take a back seat to maintaining the current infrastructure.

Mass transit issues can be politically hot topics that revolve around funding allocations and how funding is spent. Ideas for the future of public transportation vary widely with little agreement among public transit advocates, without even considering those who question the inherent value and viability of mass transit in general. Those who advocate better use of existing highway systems tout "bus rapid transit" as the inexpensive way to ease congestion. Bus rapid transit is described as bus service with rail service quality. Rail proponents argue that the only way to end congestion and its related problems is to take traffic off the road and put it on the rails. The debate between moving toward road or rail—and whether light or commuter—is so compelling that in 2003 the Port Authority of New York and New Jersey laid out $300,000 to determine how best to replace a 5.5 mile stretch of tracks on Staten Island.

Industry Leaders

The largest public transit system in the United States by far is New York's Metropolitan Transportation Authority (MTA), which accounts for about one-fourth of the nation's total trips. Its subway system makes 61 percent of the nation's heavy rail trips. Other large public transit systems include Chicago's Regional Transportation Authority, the Los Angeles-based Southern California Rapid Transit District, and the Washington Metropolitan Area Transit Authority.

In the private sector, the clear industry leader is New Jersey Transit Bus Operations Inc., a subsidiary of the huge New Jersey Transit Corporation. In addition to local buses, New Jersey Transit also operates intercity bus and commuter rail services. The Bus Operations subsidiary has annual revenue of $194 million. Another large local bus line operator in the private sector is Liberty Lines Transit Inc., based in Yonkers, New York. Liberty Lines, founded in 1955, generates $32 million in annual revenue.


There were more than 231,000 employees in the transit industry in 2001, according to the Department of Labor, Bureau of Labor Statistics. The country's inner city and transit bus drivers, totaling nearly 34,000, earned a mean annual income of $26,740.

Research and Technology

The technology of mass transit changes constantly. Many of the industry's developments have been in the area of communications. The Intelligent Mobile Data Network (IMDN) is a network of base stations and antennas scattered over a metropolitan area that can efficiently function as both a communications system and a vehicle locator. Wireless transmission systems, in conjunction with new camera technology, are also being developed for security use on rail platforms. Fare collection is another area that sees constant technological change. Many larger systems are incorporating fare cards, which allow passengers to prepay for a variable number of trips. Some industry observers see fare cards as the first step toward the use of debit cards or a system similar to those used with automatic teller machines. In 1999, Motorola announced its contract with Nanjing, China, to provide public transit riders with custom smart cards for payments of ferry, subway, and bus fares. Motorola also services the Washington and San Francisco markets with smart cards. By 2002, Motorola will service 26 transit agencies.

As environmental concerns continue to trouble the transit industry, the search for efficient alternate fuels for buses remains an ongoing task. Sacramento has experimented with bus engines that run on natural gas, while Los Angeles is testing methanol and electric power. In Peoria, Illinois, ethanol made from corn, an abundant local resource, is being examined as a possible engine fuel for buses.

Further Reading

American Public Transportation Association. Public Transportation Overview, May 2003. Available from .

"Congress Has Approved a Fiscal 2003 Omnibus Appropriations Bill that Allocated $31.6 Billion in Highway Spending and $7.2 Billion for Transit Programs." Public Works, April 2003, 8.

DeLong, James V. "Running Around." Reason, May 1999.

Dunn Jr., James. "Transportation." American Behavioral Scientist, September 1999.

Ford, Tom. "RTA's Berea Plan Stopped in Tracks." Crain's Cleveland Business, 11 October 1999.

Gebhart, Fred. "A Zippier, Hippier Way to Travel the Strip." Meeting News, 17 March 2003, 30.

"Global Briefs." Wireless Week, 27 September 1999.

Isaacs, Lindsay. "Development on the Line." American City & County, February 2002, 30-35.

Middleton, William D. "Transit, the San Francisco Treat." Railway Age, April 2002, 46-47.

Miller, Luther S. "A Rough Ride for Transit?" Railway Age, January 2003, 56-60.

Nichols, Hans S. "Roads Policy Stuck in Gridlock." Insight on the News, 17 September 2001, 24.

"Public Transit is Largely Ineffective." Society, January/February 1999.

"Public Transit Ridership Gains for 2001." Mass Transit, June 2002, 65.

"Transit Update." Railway Age, July 1999.

"Transportation Survey Sheds Light On Urban Transit." American City & County, May 1999.

U.S. Department of Labor, Bureau of Labor Statistics. 2001 National Industry-Specific Occupational Employment and Wage Estimates. Available from .

U.S. Department of Transportation, Bureau of Transportation Statistics. National Transportation Statistics, 2002. Available from .

Vantuono, William C. "Why Transit Works: Real-World Conservatives Take Another Look." Railway Age, July 1999.

"We're Headed for World Gridlock." Inside R&D, 16 November 2001, 5-6.

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