Scientific Studies show that TNR (Trap-Neuter-Return) does work. Colony Caretakers have also reported that their numbers of colony members have lowered in time with no new colony members joining. Reporting has also shown, that alleys with feral colonies present have greatly reduced the number of rats in their area, further exhibiting the benefits of feral colonies. 

The following information was taken from the Alley Cat Allies. 

Scientific studies show that Trap-Neuter-Return, also known as TNR, is the humane and effective approach for managing feral cats.
Trap-Neuter-Return improves the lives of feral cats, improves their relationships with the humans who live near them, and decreases the size of colonies over time. These studies have been conducted in multiple countries, and have been published in a variety of peer-reviewed scientific journals.

Cats benefit from Trap-Neuter-Return in both the long term and the short term.
Studies document that after neutering, cats become healthier and gain weight, and that the lifespan of cats in managed colonies increases. One study found that at the end of a 10-year Trap-Neuter-Return program, 83% of the cats in the managed colonies had been residing in those colonies for more than six years, resulting in a lifespan comparable with household cats, who have an average lifespan of 7.1 years. In addition, studies have found that aggressive interactions among cats in managed colonies decrease after spaying or neutering, while affectionate interactions increase. Cats in neutered colonies also roam less and do not fight over mates.

In addition to improving the lives of cats, these changes also tend to make cats better neighbors to the humans who live near them.
Neutered cats make less noise, for example, and fight less.

Multiple long-term studies of Trap-Neuter-Return have shown that managed colony population sizes decrease over time.
One study found a 66% decrease in the populations of managed colonies over 10 years, while another documented decreases of between 16 and 32%, starting at three years after Trap-Neuter-Return began.

Studies

Scott, Karen C., Julie K. Levy, and Shawn P. Gorman. Body Condition of Feral Cats and the Effect of Neutering. Journal of Applied Animal Welfare Science 2002, 5(3): 203-213.

This study examines the effects of neutering on feral cat health by measuring the body condition of feral cats upon trapping, then measuring it again for 14 cats who were trapped again one year later. The cats who were trapped initially were lean but not emaciated, and the cats trapped one year after neutering showed significant increases in weight and improvements in body condition. In addition, caregivers reported that the cats had a decreased tendency to roam after being neutered.

Neville, P.F. and J. Remfry. Effect of Neutering on Two Groups of Feral Cats. The Veterinary Record 1984, 114: 447-450.

Researchers studied two colonies in Regent’s Park, London to determine whether neutering had any negative effects either on the social structure of the colony or on the individual cats. No negative health effects were observed, and the colony’s social structure seemed to strengthen after the cats were neutered. Cats were seen to spend more time in groups, show fewer aggressive behaviors toward each other, and fight less.

Hughes, Kathy L. and Margaret R. Slater. Implementation of a Feral Cat Management Program on a University Campus. Journal of Applied Animal Welfare Science 2002, 5(1): 15-28.

Hughes and Slater document the success of a new Trap, Test, Vaccinate, Alter (spay or neuter), Return, and Monitor (TTVARM, a.k.a. TNR) program on the campus of Texas A&M University, looking at the changes between the implementation year and the one that followed. In the first year, 123 cats were trapped, compared to 35 in the second. Over the course of the program, 32 cats and kittens were adopted. In the second year, only three kittens were found, and the researchers assume that these were lost or abandoned, as no litters or nursing mothers were seen in that year. The program illustrated how a well-managed TNR program can stabilize a population of cats.

Levy, Julie K., David W. Gale, and Leslie A. Gale. Evaluation of the Effect of a Long-Term Trap-Neuter-Return and Adoption Program on a Free-Roaming Cat Population. Journal of the American Veterinary Medical Association 2003, 222(1): 42-46.

This study tracks a TNR program on a Florida college campus over the course of 11 years to determine the characteristics of cats involved and to document the effectiveness of the program at controlling the population of cats on the campus. Kittens and tame cats were adopted out, and new cats were trapped and neutered. At the end of the study, the population had decreased by 66%, and over 80% of the cats had been resident for more than six years—a duration comparable to the mean lifespan of 7.1 years for household cats.

Natoli, Eugenia, et. al. Management of Feral Domestic Cats in the Urban Environment of Rome (Italy). Preventative Veterinary Medicine 2006, 77: 180-185.

This study documents the cat population over 10 years in a well-established Trap-Neuter-Return program in Rome, Italy, and determines that it has produced significant reductions in the numbers of cats within the city. Over the course of the program, the number of registered feral cat colonies increased from 76 to 965. After three years, the average number of cats in registered colonies began to decline, showing a decline between 16% and 32% over the course of the study period. The authors caution that education is needed to prevent intact pet cats from joining the stray and feral cat population via immigration.