We introduce a new type of electric transit bus (ETB) system that uses the innovative wireless power transfer technology developed by the Korea Advanced Institute of Technology (KAIST), which is called on-line electric vehicle (OLEV). In the ETB system, the wireless-charging infrastructure installed under the road charges the fleet of electric buses that are operative over that road. The technology is innovative in that the battery in the bus is charged while it is moving over the charging infrastructure. Unlike conventional electric vehicles, the OLEV-based ETB system is a road-vehicle integrated system. Since charging occurs while the vehicle is operational, the performance of the operation depends on the system integration of the vehicle and the road in which the charging infrastructure is embedded. In this paper, we qualitatively analyze the benefits of the OLEV-based ETB system from the energy logistics perspective. We then present two analytical economic design optimization models. The first model is for an ETB system operating in a "closed environment" with no traffic and no heavy vehicle interactions. The OLEV-based shuttle bus currently operating on the KAIST campus constitutes such a case. The second model is the "open environment model" and considers an ETB system operating in normal traffic conditions. We also present the result of numerical case studies for the optimization models. The goal of this paper is to present an innovative ETB system and a logical design framework for commercializing and deploying that system.