Citation

Chen W. Plann. Theor. 2007; 6(1): 69-94.

Copyright

(Copyright © 2007, SAGE Publishing)

DOI

10.1177/1473095207075162

PMID

unavailable

Abstract

Rail transit investments have been widely supported by the local planning agencies and government financing resources for their perceived environmental and social benefits, as well as the compact development patterns rail corridors support. Despite the widespread expectations, the sustainability of rail transit projects is often found questionable, as are the actual benefits rail investments can bring about in practice. One of the reasons for rail investments' tendency to perform less well than expected has been identified as a prevailing bias of local officials toward high-capital rail transit investments that are underwritten by the transit financing mechanism (Johnston et al., 1988; Kain, 1990; Pickrell, 1992; Richmond, 1999; Flyvbjerg et al., 2003, 2004, 2005). This article examines the funding mechanism problem underlying the rail transit project selection bias and hypothesizes this problem to be a principal-agent problem. Incentive theory is introduced as an analytical tool to model the problem, to better understand the nature and causes of the problem, and to suggest solutions to it. By applying incentive theory to analyze the project development process of the US New Starts program, it is suggested that the funding mechanism problem associated with the bias toward capital-intensive rail investments can be viewed as a principal-agent problem between the Federal Transit Administration (FTA) (the principal) and local project sponsors (the agent). The incentive approach proposed in this article provides insights for analyzing the relation between central government and local agencies in the planning and decision-making process of rail transit investment, and for addressing political problems, primarily rent-seeking behaviors, associated with central government earmark funding.

Language: en