Insights
Covid-19 Relief Funding for $31B Private Transit Services (PTS) Industry
The Essential but Overlooked Service accounts for 14.4 Million Daily Passengers
First published on Medium, 7 July 2020. Republished here in full.
Private Transit Services Industry
38% or 50 million of all working adults in the US use public + private transit services on a daily basis while the rest commute in their personal vehicles. Smooth functioning of this public + private or people transportation infrastructure is, hence, critical for smooth functioning of the US Economy.
The four primary modes of people transportation which make up the People Transportation Services Industry are Public Transit, Airlines, Amtrak, and Private Transit Services (PTS) — which include intercity travel, school buses, employee / airport / hotel / student shuttle services, etc. — delivered by 155,806 small, local and regional private enterprises who have built the industry from the ground up since the 80’s in the post-deregulation era without any public funding from local, state or federal governments.
Besides providing daily transportation services to businesses and consumers, the PTS segment plays a vital role in linking and connecting the other modes of transportation and filling critical gaps in their coverage.
PTS Industry also serves the $29B Group Travel & Tour Industry — Sightseeing, National Park Tours, Wine / beer tasting, Amusement Parks, Ski & Snowboarding, Rafting — and Public Events — Sporting events & Music Concerts.
The PTS Industry contributed $31B to the US GDP in 2019. What is significant is their contribution in carrying 14.4 million people daily who collectively represent ~10% of the GDP. Services delivered by the PTS Industry have been recognized by the Federal, State and Local governments as Essential Service — along with healthcare, law enforcement, energy, public works, water and wastewater, food & agriculture among others.
The PTS Industry carries 28.6% or 14.4 million passengers — 8 x and 165 x the passengers carried by Airlines and Amtrak.
Impact of Covid-19 Pandemic on the PTS Industry
The virtual shutdown of the country due to the Covid-19 pandemic has resulted in 90%+ drop in the demand and revenues for the PTS Industry which has severely crippled the Industry’s ability to continue to provide the services on which 14.4 Million passengers had depended in the pre-pandemic era.
Recovery for the People Transportation Services Industry from the lows in Q2 2020 is expected to be slow and prolonged not reaching pre-pandemic business activity level until early 2022. We are projecting revenue loss of more than 45% — or $160B — for the industry between Q3 2020 and end of Q4 2021.
Recognizing the importance of the role played by the people transportation industry, US Treasury Department has delivered Covid-19 Relief Funding under Cares Act 1.0 to:
- Public Transit Agencies: $25B grant
- Airlines: $25B grants + $25B long-term loan facility
- Amtrak: $1B grant
The relief funding for these three modes of transportation is not sufficient to make up for all of the projected revenue loss, but it has helped them avert a catastrophic failure. It will enable them to operate at ~50% of their pre-pandemic capacity and then ramp up to meet the rising demand as the Economy reopens.
No such funding provision was made for the PTS Industry under Cares Act 1.0.
PTS: The $31B Industry Overlooked by US Treasury
14.4 million passengers depend on Private Transit services, which have been recognized as Essential by the Federal Government and Department of Transportation, yet it has been overlooked by the US Treasury Department for pandemic relief funding, which the industry needs for its very survival.
The PTS Industry is comprised of 155,806 small business enterprises which collectively contribute $31B to the GDP. The industry employed 494,638 people, operated 362,000 vehicles and had deployed $61.9B of CapEx as of the end of 2019.
The Industry experienced 90%+ drop in demand and revenues in April / May 2020 resulting in decommissioning of more than 325,000 vehicles and furloughing more than 400,000 people.
We are projecting a staggering $20.4B — or 45% — revenue loss for the PTS Industry between Q3 2020 and end of Q4 2021 compared to the pre-pandemic era.
The 155,806 business enterprises delivering this Essential service need relief funding to preserve and protect their employees and their fleet of vehicles which will be needed as the Economy reopens.
The US Treasury’s Paycheck Protection Program (PPP) has helped an estimated 80% of the 155,806 PTS business enterprises with their critical financing needs since the beginning of the pandemic. The PPP program, however, is set up and funded for just 24 weeks and will be ending in Fall of 2020. The Industry needs a longer-term funding plan to ensure its survival and to ensure its ability to continue to deliver private transit services to 14+ million passengers daily.
Unlike other segments of the Economy, the PTS Industry has not seen or experienced recovery from the April / May lows yet. With the PPP program ending in just a few weeks, the Industry is faced with utter devastation. With an estimated 90%+ of revenue loss in Q2 2020, 80%+ projected loss through the end of 2020, and $20.4B loss between Q3 2020 and end of Q4 2021, the industry needs urgent and immediate relief funding to survive this downturn.
Without relief funding, an estimated 60% of the 155,800 operators — or 93,500 operators — serving the industry are projected to fail resulting in estimated 300,000 people of the total of 494,638 people employed in the industry losing their jobs. The business enterprises who brought their employees back on payroll under the PPP program will be forced to lay off those employees again, which will cause an estimated 250,000 to 300,000 people to seek unemployment benefits again.
As the Economy starts to open up the loss of 60% of the capacity of the PTS industry will have a severe impact on the 14.4 million passengers who have relied on PTS for their daily transportation needs to be able to rejoin the Economy.
Covid-19 Funding Request for the PTS Industry
We are proposing $11.75B grant & $10B long-term loan facility as part of Covid-19 Relief Funding package for the PTS Industry. The funding package, which is long overdue, will allow the Industry to weather the $20.4B in revenue loss projected over the next 6 quarters.
Public Transit Agencies have projected $48.3B revenue loss for their Industry over the next 6 quarters and to help them weather this downturn, US Treasury has awarded $25.0B in additional Grants to keep the Industry afloat and ramp up as the Economy starts to open up. Airlines have received $25B grants and $25B loan facility and Amtrak has been awarded $1B grant.
Relief funding requirement for the PTS Industry is just as acute as for Public transit, Airlines and Amtrak. The proposed $11.75B grant and $10B loan facility are long overdue and critically needed to save the industry from a catastrophic failure.
The proposed $11.75B grant for the PTS Industry translates to $545 per passenger as compared to $490 for Public Transit, $9,634 for Airlines and $7,663 for Amtrak.
The $11.75B grant for the PTS Industry translates to $15,836 for each person employed by the Industry, which is modest compared to 40%, 59% and 48% of the grant per employee for Public Transit, Airlines and Amtrak respectively.
Coronavirus Economic Relief for Transportation Services (CERTS) Act — S.4150
On July 1, 2020, Senators Susan Collins (R-ME) and Jack Reed (D-RI) introduced CERTS Act — S.4150 — for $10 billion grant and other forms of emergency assistance for transportation service providers, including the PTS industry. Not less than 50% of the amount will be used to provide grants to maintain employment through December 31, 2020. This Act is slated to cover:
- Eligible Activities: Acquisition of services, equipment, PPE
- Ongoing operations: Rent, Leases, Insurance, Debt Service
The funding package proposed by Senators Collins and Reed is long overdue and makes amends for the PTS being overlooked under Cares Act 1.0. With PPP funding due to run out in weeks, this funding is critical to save the PTS industry from a catastrophic collapse. Without the funding an estimated 60% of the operators will not be able to survive past Summer 2020.
There is broad recognition that the Industry needs relief funding as evidenced by a letter from 28 Senators to Senate Majority Leader Mitch McConnell and Minority Leader Chuck Schumer.
The coronavirus is still in Phase 1, which is not expected to run its course for another couple of months followed by the second wave which is anticipated in winter months and well into 2021.
Public Transit Services industry, Airlines and Amtrak are projecting slow and prolonged recovery from the pandemic lasting several quarters. Recovery for the PTS Industry is expected to follow similar ramp as these other modes of people transportation.
Hence, the proposed CERTS Act funding for coverage of payroll and other expenses through December 2020 will not be sufficient as the Industry is not expected to see full recovery until early 2022.
The CERTS Act — when approved — will provide much-needed relief to the PTS Industry. The proposed funding, however, is for too-short-a-term. We request the legislators to take a longer — 6-quarter vs 2-quarter — view and approve $21.75B funding — $11.75B grants + $10.00B loans — that will be needed through the end of 2021.
Whether the funding is for 2 quarters or 6 quarters, what is most critical is addressing the existential threat to the PTS Industry with decisive action and swift approval of the CERTS Act relief funding package.
This article first appeared on Medium on 7 July 2020 and is republished here in full by its author. Figures and projections are as stated at the time of writing.
