Recently, both Vice President Al Gore and
the leadership of the Republican Party have indicated that they
will support efforts to increase spending on public transit
systems. The press has reported that the Vice President would
"devote $25 billion over ten years to improving mass transportation
in states and cities, reducing air pollution and liberating
Americans from too heavy a dependence on oil," and that Republican Party
officials have agreed to "decisively [move] toward the center on
such issues as...public transit." Public transit systems
remain popular in public appropriations and political rhetoric, yet
the evidence clearly shows a vastly different story in America's
cities and suburbs.
Public transit's share of urban travel has
plunged, from 7.1 percent in 1960 to 1.8 percent by 1998--a 75
percent drop in just four decades. Moreover, public transit is
highly concentrated: 70 percent of transit ridership occurs in just
seven metropolitan areas, with half of that in New York City alone.
Yet annual federal spending on transit has surged. Since 1960,
federal, state, and local governments have provided a stunning $385
billion in inflation-adjusted funds to America's transit
systems--including almost $150 billion in federal subsidies. And thanks
to the Transportation Equity Act for the 21st Century (TEA 21),
passed by Congress in 1999, annual spending on transit will
increase from $4.6 billion in 1998 to $8.2 billion in 2003. The $41
billion spent in just those five years will make transit one of
Washington's fastest growing spending programs.
Transit remains one of the costliest ways
to move people from one place to another, and it is getting more
expensive compared with the alternatives. The cost remains
significantly higher than the costs of other modes of
transportation--nearly 50 percent higher than the cost of Amtrak
and four to five times the cost of automobiles, airlines, and
private bus services. Between 1970 and 1995, transit's
inflation-adjusted cost per passenger mile rose 164 percent;
Amtrak's cost has increased 9 percent since 1975; and automobiles,
private bus services, and airlines have experienced cost reductions since 1970. After the
deregulation of inter-city private bus and airline industries in
the late 1970s and early 1980s, competition succeeded in driving
down unit costs. Unfortunately, public transit systems--with their
legally enforced monopolies--have been immune to the pressure of
competition that introduces cost efficiencies in other
industries.
Despite the dedication of significant
taxpayer funds to transit since World War II and the concentration
of service, little progress has been made in reducing traffic
congestion. Given its minuscule market share, even if there is a
dramatic turnaround in usage and transit's market share were to
double, it will not reduce traffic congestion in America's
suburban-oriented society with its scattered trip patterns.
Nevertheless, with the right transit
policies, there is still a significant potential for transit to
serve the public more effectively in the few markets where it might
be viable. For example, transit systems around the world have found
that contracting out for various services is making public transit
more affordable. The transit agencies contract with private or
public entities for public transit routes, regions, operating
facilities, vehicles, or specialized services (such as door-to-door
service for the disabled). Competitive contracting for these
services lowers both direct and indirect costs by helping to keep
fares affordable, maintain or expand services, and maintain the
competitive position of transit relative to the automobile. It has
been applied successfully and comprehensively, for example, to
entire public transit systems (bus and rail) in London, Stockholm,
and Copenhagen, and in Perth and Adelaide in Australia.
Yet
the use of competitive contracting in America is proceeding slowly.
Currently, while 70 percent of paratransit (dial-a-ride) service is
competitively contracted, only approximately 10 percent of public
transit bus service is contracted out. San Diego is one example; it
has converted 43 percent of its bus system to competitive
contracting and is continuing this process at a rate that still
guarantees the jobs of its current public transit agency
employees. Cost savings in such major
metropolitan areas that are contracting with private-sector
providers for services average about 33 percent.
Congress should encourage state and local
governments to convert all bus and rail services to competitive
contracting as quickly as possible to facilitate a combination of
service expansion, fare reductions, and tax reductions. The public
transit agency should purchase transit service through the market
by awarding contracts to a lowest-priced but responsible and
responsive public or private bidder. It should retain full control
over management and operations, routes, schedules, fares, vehicle
livery, and service standards. The available capital funding should
be used for the most cost-effective projects. Virtually all policy
and service decisions should remain the prerogative of the public
agency. And construction of new urban rail systems--with their
excessive costs for the extremely low population densities they
would serve and their limited market share--should cease.
The
improved financial performance that governments would achieve from
implementing such policies could arrest or even reverse transit's
downward market share trend--which would be good news for transit
riders and taxpayers alike.
PUBLIC TRANSIT'S SHIFTING PURPOSE
Why
has transit persisted? Given its consumer underutilization and
geographically concentrated benefits, why have governments
continued to subsidize transit? Transit's ability to survive--and
even thrive--may be attributable to its success in posing as a
"solution" to a changing array of national concerns.
The
U.S. Urban Mass Transit Administration was created in the
mid-1960s, formalizing the federal role in transit as part of a
larger new initiative that also included the Department of Housing
and Urban Development (HUD). It was intended to prop up collapsing
urban transit systems in order to reverse accelerating central-city
deterioration.
A
few years later, the energy crisis of the early 1970s enabled
transit to reinvent itself as an energy-efficient alternative to
the gasoline-dependent automobile. Transit was seen as an integral
part of America's emerging energy conservation policy. As
environmentalism emerged as a national movement following the first
Earth Day in 1970, transit presented itself as an environmentally
friendly alternative to cars.
Today, sprawl and congestion are a growing
concern, and transit poses as the antidote while still emphasizing
its role as the cities' savior now that urban revitalization is
back in vogue. Transit also professes to provide cosmic well-being,
as Federal Transit Administration head Gordon J. Linton suggests
when he claims that investments in transit "help pull together
people and their communities so they can fully realize the promise
of America."
As
the record indicates, the Federal Transit Administration has failed
to achieve any of these objectives. There is more driving, while
transit use continues its long-term decline. Older center cities
are still losing jobs and residents. America is more dependent on
imported oil than ever before. Although the air is cleaner today
than it was decades ago, the gains are due to technological
improvements in cars, not transit use.
How
can transit's success in obtaining ever more federal funding be
reconciled with its failure to maintain its market share? The
reason appears to be that the federal transit program has evolved
into a massive pork-barrel project. It bestows significant
financial benefits upon the design and construction firms that
build and renovate transit systems, and upon the unionized
workforce that must operate the system at wages in excess of those
earned by non-union counterparts.
A
new rail-based transit system for a major metropolitan area may
cost as much as $10 billion. For example, Washington, D.C.'s new
Metrorail system, which has been under development since 1970, is
estimated to have cost $10 billion, while Atlanta's system cost $3
billion.
Such
costly systems provide lucrative long-term contracts to major
construction firms and their subcontractors. Because construction
workers on these projects must be paid higher-than-market wages, trade
unions are also influential advocates for the continuation and
expansion of rail-building programs. The availability of such
widespread financial benefits induces Congress to shift federal
resources from less costly and more efficient bus service, which
involves little new construction, to more costly and less efficient
rail alternatives, such as light rail, commuter rail, and subways.
Once transit systems are completed and in operation, unions and
their members continue to receive preferential treatment and
financial windfalls. Such federally mandated
generosity encourages America's approximately 200,000 public
transit workers to become aggressive advocates for the preservation
and expansion of an unreformed federal transit program.
Transit advocates often claim that transit
has the potential to significantly reduce traffic congestion. The
reality, however, is that transit ridership has steadily declined.
Failing to draw in commuters, unable to attract new riders, and
focusing on rail lines at the expense of bus routes, the nation's
transit systems have proven to be unable to improve traffic
congestion.
Many
privately funded transportation and urban planning experts are
skeptical about transit's reach. For example, at a recent U.S.
General Accounting Office conference, Anthony Downs of the
Brookings Institution said that "Attempts to cope with rising
traffic congestion by shifting more people to public transit are
not going to work." At the same conference,
David Luberoff of Harvard's Kennedy School of Government made the
following observation:
Why
are we still investing in mass transit despite 20 years of data
showing that rail transit generally does not have significant
impacts on either mobility or air quality?... At some point,
however, the rest of the country either says to the few areas that
getting the bulk of the transit money, "That's enough" or "We want
to build transit lines too." It looks like it's the latter.
For
the past 25 years, one of the federal government's primary transit
policy goal has been to draw people out of their automobiles.
Despite spending hundreds of billions of dollars, however,
transit's share of urban travel has continued to fall. Urban rail
systems have not helped. For the overwhelming majority of trips,
including work trips, transit by rail is simply not a viable
alternative to the automobile. Transit services have spent their
funds on higher-than-necessary operating costs and overcapitalized
rail systems. Rather than expand and improve existing services, the
transit systems have chosen to subsidize urban rail systems that
have at best a marginal impact on select parts of a metropolitan
area.
Declining Market Share
Transit's ridership, as measured by "boardings" (each time a
passenger enters a transit vehicle) and market share (percentage
of passenger miles traveled on public transit), has been falling
for decades. Annual transit journeys per capita have dropped 25
percent since 1970, and annual journeys per capita in 1996 were at
the lowest point since before the turn of the century. Chart 1 illustrates these
trends.
Annual transit boardings per capita have
fallen in 38 of the 49 major metropolitan areas since 1980. (See Table 1.) The New York City
metropolitan area retains the highest market share at 9.3
percent,
which is twice the share of Honolulu, which takes second place at
4.6 percent. Transit exceeds 2 percent of market share in only
seven metropolitan areas, and 1 percent in 17 areas. Transit
exceeds 2 percent market share only in cities in which a large
number of commuters who travel downtown use transit. This
underscores the extent to which transit has become irrelevant to
metropolitan transportation.
Public transit ridership is highly
concentrated in the largest metropolitan areas. New York City
represents only 7 percent of the U.S. population but accounts for
nearly 42 percent of transit passenger miles annually. New York,
Chicago, Los Angeles, San Francisco, Washington-Baltimore,
Philadelphia, and Boston together comprise less than 25 percent of
the national population, but they account for approximately 75
percent of public transit passenger miles.
The Journey to Work
Why has transit's overall market share declined? A large
percentage of transit's loss is due to its declining market share
of work trips. This loss of market share for work trips is
particularly significant because the problems that transit
ostensibly addresses--pollution and congestion--depend on transit's
success among commuters.
Transit's share of work trips has declined
by 60 percent since 1960. (See Chart 2.) During the 1980s,
transit's market share for work trips declined in all but two of
the 39 metropolitan areas with populations of more than 1 million.
Transit's market share grew only in Houston and Phoenix, both of
which greatly increased bus service levels from a small base. In all
metropolitan areas that built or expanded urban rail systems,
transit's market share dropped. The declining per capita ridership
in the 1990s suggests that transit's work trip market share is
continuing its downward trend.
Yet
in the largest downtown areas, transit retains a substantial market
share for work trips. For example, 73 percent of New York's
downtown commuters and 61 percent of Chicago's use transit.
Transit's downtown work trip market share exceeds 30 percent in six
other downtown areas: San Francisco, Boston, Philadelphia,
Washington, Seattle, and Pittsburgh. In the suburban areas that
surround the major downtown areas, however, transit carries a much
smaller percentage of work trips, peaking at 12 percent in New York
and averaging under 4 percent in the 24 other metropolitan
areas.
Transit's small market share with respect
to suburban work trips results from two factors. First, suburban
locations rarely receive frequent no-transfer service. For suburban
commuters, then, public transit is often slower and less convenient
than private automobiles. Second, employment densities and, thus,
transit demand are much lower outside downtown areas. As a result,
transit offers virtually no hope for reducing traffic congestion in
suburban areas.
Commuters Prefer Cars
New urban rail systems have failed to attract new
riders--and, thus, to reduce traffic congestion--for two
fundamental reasons.
-
Most locations
in the urban area cannot be served by rail. In the typical
city with a new rail system, more than 99.2 percent of the
urbanized area is more than a quarter-mile walking distance from a
station.
(See Chart 3.) As a result,
commuters cannot conveniently reach the overwhelming majority of
jobs and homes by urban rail unless they walk long distances or
transfer to other carriers, either of which is time-consuming and
inconvenient.
-
Rail offers no
speed advantage. Even in the few corridors served by new
urban rail, transit generally provides no speed advantage compared
with highway alternatives. New light rail systems average 17.3
miles per hour. Metro systems average 19.4 miles per hour, while
commuter rail systems average 33.2 miles per hour. Express
bus systems tend to operate at approximately 25 miles per hour. In
comparison, the 1995 Nationwide Personal Transportation Survey
found that automobiles were faster than all modes of public transit
and nearly double the speed of both light rail and metro.
Furthermore, these comparisons understate the automobile's
advantage because transit trips require time in walking to and from
transit stops and in connecting trips by automobile or bus.
Transit Relies on Rail
A number of urban areas have built expensive new rail systems with the
expectation that they would attract enough automobile drivers to
reduce traffic congestion. Some have made the claim that a single
light rail line has the same person-carrying capacity as up to six
freeway lanes and that metro systems can carry even more. While this
is theoretically true, the volumes that new U.S. light rail lines
carry do not remotely approach such a level. (See Chart 4.)
On
average, new U.S. metro lines carry 60 percent less volume than a
single freeway lane couplet and 3
percent more volume than a single
arterial lane couplet. New light rail lines carry
80 percent less volume than a single
freeway lane couplet and 50 percent less volume
than a single arterial lane couplet
with traffic signals.
Because most new urban rail riders are
former bus or carpool passengers, new rail systems have little or
no effect on automobile congestion or overall commuting patterns. For
example, Washington, D.C., has built the nation's largest new urban
rail system with routes totaling 90 miles of track, all at a cost
of $10 billion. Washington's Metro, however, has had a minimal
impact on the share of commuters who drive to downtown Washington,
which is by far the region's strongest transit market. (See Chart 5.)
DOES TRANSIT CLEAN THE AIR?
The single largest cause of air pollution is
automobile use. Because urban rail systems do not
materially reduce automobile use, they cannot materially reduce air
pollution. A report by the U.S. Department of Transportation
confirms that rail systems have little impact on pollution. For
example, in Washington, D.C., the nation's most comprehensive and
expensive new rail system is credited with removing barely 1
percent of emissions in the area. The report concludes that
new rail systems make only modest air quality improvements because
only part of the additional ridership of these systems is drawn
from SOV (single occupant vehicle) users. Others are drawn from
buses, carpools, and latent demand.
Although the availability of transit has
had no material effect on air pollution, air pollution from mobile
sources (street and highway traffic) has declined significantly,
largely as a result of technological improvements in the internal
combustion engine. As the vehicle miles traveled have increased,
air pollution has decreased. (See Chart 6.) Between 1970 and 1997,
carbon monoxide emissions dropped 43 percent, volatile organic
compound emissions fell by 60 percent, and nitrogen oxide (NOx)
emissions declined 5 percent. At the same time, the total
vehicle miles traveled increased more than 130 percent. Even Los
Angeles, with the worst air pollution in the nation, has made
significant progress. From 1976 to 1998, the number of days per
year that violated federal ozone standards fell by nearly 70
percent,
despite a more than 75 percent increase in traffic volumes.
Moreover, revolutionary automobile
technologies are likely to reduce air pollution still further.
Honda and Toyota are now marketing hybrid gasoline-electric
vehicles that substantially increase gasoline mileage and reduce
air pollution. A number of manufacturers are working on a fuel cell
propulsion technology that would be non-polluting. Honda has
announced that it will market fuel cell automobiles in California
by 2003.
Nonetheless, it will take at least two decades for the nation's
vehicle fleet to be converted; therefore, mobile source pollution
will continue to be a concern.
Increasing population densities, however,
will only make pollution worse. Higher densities lead to more
vehicle miles traveled per square mile and more severe air
pollution. Urban areas with the lowest air pollution have
population densities under 1,750 people per square mile. (See Chart 7.) Urban areas that have
"extreme" air pollution have average population densities about
double that of the urbanized areas with no air quality
problems.
In
addition, because traffic congestion reduces average speed, it
increases air pollution. For two of the three primary mobile source
pollutants, carbon monoxide and volatile organic compounds, the
optimal average vehicle operating speed is approximately 55 miles
per hour. As average speed decreases,
pollution increases. The third source pollutant, nitrogen oxides,
is different: The optimum speed is 20 miles per hour, although
little additional pollution is produced at speeds up to 45 miles
per hour. Thus, with respect to air
pollution, the optimum operating speed for nitrogen oxides is
approximately 45 miles per hour. Nationally, average work trip
speeds are less than 34 miles per hour, indicating that air
pollution generally could be improved by increasing average
automobile operating speeds. (See Chart 8.)
THE HIGH COST OF TRANSIT
The overall productivity of the transit industry is much lower than
that of other passenger transport industry. Transit costs per
passenger mile are significantly higher than those of any other
mode of transportation--nearly 50 percent higher than the cost of
Amtrak and four to five times higher than the cost per person mile
of automobiles (including personal trucks), airlines, and intercity
(private) buses. (See Chart
9.)
Transit's escalation of costs has exceeded
that of other modes by a substantial margin. From 1970 to 1995,
inflation-adjusted transit costs per passenger mile rose 164
percent. Amtrak's costs, in comparison, rose only 9 percent between
1975 and
1995, while for automobiles, intercity buses, and airlines, the
costs actually decreased between 1970 and 1995. (See Chart 10.)
The
intercity bus and airline industries were deregulated in the late
1970s and early 1980s, and the ensuing competition drove down unit
costs. In contrast, all public transit systems maintain legally
enforced monopolies in their markets and are thus immune to the
competitive pressures that introduce efficiencies in other
industries. Even industries that were not deregulated generally
experienced productivity gains over this period, reflecting overall
productivity improvements throughout the U.S. economy. Public
transit, however, did not experience any such gains.
Among the many forms of transit, new rail
systems are far and away the most costly. Among the 28 proposed
rail systems evaluated for federal funding by the Federal Transit
Administration in 1999, 27 are so costly that it would be less
expensive to lease an economy car for each new commuter. Six would
be more costly than leasing a luxury car.
A VIABLE ROLE FOR PUBLIC TRANSIT
Although transit fails to achieve any of its broad
national objectives, a reformed transit program could achieve a few
narrowly defined social and regional objectives.
First, transit could play an important
role in America's welfare system. The automobile is the major form
of personal transportation in this country, but its cost may exceed
the resources of low-income individuals and households. The absence
of public transit limits the mobility of low-income individuals,
and this in turn restricts their ability to achieve financial
independence through employment. Some subsidized transit,
therefore, may be an appropriate part of America's welfare system
for low-income individuals, including the elderly.
Although social welfare objectives may
justify some transit subsidies, recent trends in federal transit
spending have been detrimental to the poor. Federal expenditures
have shifted away from programs that serve the poor, who often live
in the central cities, to programs that primarily serve
higher-income suburban residents who commute to jobs in the center
city. Too often, when cities create light rail systems, they then
cancel or reroute existing bus lines to transit stations. This
undermines the intra-urban bus transit service that benefits
low-income groups. For example, in Los Angeles, a planned light
rail expansion would have diverted financial resources away from
the routes serving poorer residents toward those serving suburban
commuters. In 1998, minority residents sued the transit authority
over its plans and ultimately forced the transit authority to
cancel its light rail expansion.
Transit can also be practical in an old,
large center city with a significant employment base downtown and
difficult automobile commuting conditions due to congestion,
limited parking, and narrow streets. Such urban areas number no
more than seven nationally--New York City, Chicago, Los Angeles,
San Francisco, Washington-Baltimore, Philadelphia, and Boston.
These cities account for more than 70 percent of transit's
ridership, but within each of these urban areas, the downtown area
represents less than 20 percent of the metropolitan area's jobs.
Despite vast expenditures of resources on transit, other cities
have not been able to replicate the ridership shares achieved by
these seven cities (which have themselves fallen). One notable and
expensive failure is Portland, Oregon, where the metropolitan
transit work trip market share fell 36 percent from 1980 to 1990
despite the opening of a new light rail line. Such failures,
however, have not discouraged Congress or the President from
devoting more and more resources to public transit.
Although transit may be appropriate and
competitive in a few cities, the current federal transit system
does not necessarily serve these cities in a cost-effective manner.
Moreover, while transit may be competitive in a few older cities,
albeit with substantial subsidies from all levels of government,
this does not justify the existing federal system. Today federal
subsidies redirect fuel tax dollars paid by motorists across the
land to transit systems that serve a fraction of the commuters in a
handful of cities.
The
federal transit system as it currently exists, with its costly
mandatory labor contracts and its monopoly dominance of the markets
it serves, should be reformed to reduce costs and improve service
for transit systems nationally. Two steps in particular would
materially improve transit systems throughout the country:
competitive contracting (public-private competition) and rapid
transit alternatives that rely on bus rather than rail
technologies.
Competitive Contracting
Governments worldwide are converting entire public transit systems
operated by government organizations to a system based on
competitive contracting to reduce rates for unit costs to market.
Under competitive contracting, transit agencies purchase transit
services from the competitive market, awarding service contracts to
the lowest responsible and responsive public or private bidder. The
transit agencies still retain full control over management and
operations, routes, schedules, fares, vehicle livery, and service
standards. Virtually all policy and service decisions also remain
the prerogative of the public agencies. Contractors simply provide
the services specified by the public agencies at the fares
specified. To the customer, the transit system remains an
integrated whole with no apparent changes. Where contractors
provide capital assets, transit reserves can be reduced.
Cities throughout the world are using
competitive contracting to keep fares affordable, maintain or
expand services, and maintain the competitive position of transit
relative to the automobile. Cities that have applied competitive
contracting to transit successfully and comprehensively include
London, Stockholm, Copenhagen, Perth, and Adelaide, Australia.
The
conversion to competitive contracting has proceeded much more
slowly in the United States, but significant savings have been
achieved nonetheless. (See the Appendix for additional
information.) Currently, approximately 10 percent of public transit
bus service and 70 percent of paratransit (dial-a-ride) is
competitively contracted in the United States. In major
metropolitan areas, the cost savings from contracting with
private-sector providers have averaged 33.1 percent. Table 2 provides details on the
U.S. experience with competitive contracting in 43 cities.
Transit agencies may competitively
contract public transit routes, regions, operating facilities, or
specialized services such as door-to-door service for the disabled.
Vehicles and capital facilities may be provided publicly or
competitively. Competitive contracting can be used as a strategy to
achieve competitive costs for an entire transit system. It can also
be used to achieve "ad hoc" contracting, or competitive costs for a
specific portion of a transit system such as maintenance and
repair. Most international competitive contracting has involved
system conversion, while most U.S. cases have been ad hoc.
Competitive contracting lowers costs both
directly and indirectly. Direct savings result from the difference
between the non-competitive cost of operating a service and the
market-based cost established through competitive contracting.
Direct savings may occur either when cities award contracts to
private firms or when public transit agencies provide services at
market rates. Indirect savings occur when non-competitive services
reduce their costs in response to competition or the perceived
threat of competition.
Governments also gain financially from the
higher tax revenues that private contractors pay. Public transit
operators, unlike private companies, are typically exempt from most
taxes. They are "tax users," not tax payers.
By
phasing in competitive contracting to match the employee attrition
rate, governments can implement competitive contracting without
requiring layoffs of transit employees. Cities can implement faster
transitions by buying out expensive federally imposed labor
privileges. Some studies have estimated
that the savings from competitive contracting would pay for such
buyouts within two years.
Transit Alternatives
The federal, state, and local governments' fixation with expensive
rail systems has resulted in an overinvestment in a few
transportation corridors at the expense of improving more highly
traveled corridors.
Advocates of rail systems often claim that
urban rail is more cost-effective than bus alternatives,
principally because it carries higher passenger volumes per
on-board employee. A single driver can operate a bus with a
capacity of 60 to 75 passengers, but a 10-car urban rail unit can
carry more than 1,000 passengers with one to three employees.
Despite these differences, however, rail systems are rarely less
expensive than bus systems because of the vast differences in the
capital costs needed to build and service the systems.
Rail
systems are much more capital-intensive than bus systems. In 16 of
the 18 rail systems built in the United States since 1980, the full
cost per passenger mile of rail service, including both capital and
labor, is higher than that of bus service. On average, new rail
systems are approximately 175 percent more costly than bus systems
in the same communities.
These differences are even more pronounced
when comparing a new rail system to the bus routes that it
eliminates. Rail systems generally are built to operate on the
transit routes with the highest ridership. In fact, rail lines
usually replace the best bus routes. Because bus service serves
virtually all of the rest of the transit system, including the
least productive routes, the most cost-effective bus routes can be
more than 60 percent less expensive than the average bus route. High
volume bus routes, therefore, are almost always less costly to
operate than rail lines.
A
U.S. Department of Transportation report confirms that express bus
systems in dedicated freeway lanes are five times more
cost-effective than light rail and heavy rail on a
cost-per-passenger-mile basis. On average, the cost per
person mile of new urban rail is more than three times more
expensive than buses in the same urban area. New urban rail is even
less cost-effective when compared to high volume express bus
services: Rail costs nearly 15 times more than the nation's most
efficient express bus system. Moreover, express buses
operating on existing freeways are able to provide door-to-door
trips that are faster than those of new urban rail systems. (See Chart 11 and Table 3 for more information on
rail and bus costs.)
Another U.S. Department of Transportation
report indicates that there is no passenger preference for rail
over bus where comparable levels of service are provided. In other
words, any passenger volume that can be accommodated by new urban
rail lines could be moved less expensively by express buses.
Despite the disadvantages and higher costs
of rail lines versus buses, public planning processes more often
than not prefer rail alternatives to buses. This suggests that bias,
political influence, or other factors are manipulating the planning
process. For example, in Portland, a busway alternative was
rejected because rail advocates claimed it would "pour 500 buses an
hour"
onto the downtown transit mall (an exclusive bus roadway). At the
time, Portland operated fewer than 450 buses a day, and no
reasonable set of circumstances could have led to such a
concentration of bus traffic in a single location. In Chicago and
Milwaukee, planners who favored rail compared it to bus
alternatives with much lower levels of service, and thus weighted
the odds against bus service.
What
sustains rail's popularity in the face of the evidence suggesting
that alternatives are more practical? Public officials may
mistakenly believe that rail lines reduce traffic congestion. While
virtually none of the technical data support the claim of traffic
reduction, some planning documents do offer conclusions that
exaggerate the minuscule benefits conferred by rail systems or that
contradict their own analyses.
The
availability of federal subsidies for rail lines is perhaps the
most important factor favoring rail service. Local governments
routinely seek to improve their economies by obtaining federal
funding that otherwise would go elsewhere in what could be called
the "if we don't take the money, Baltimore will" syndrome. The
anticipated economic impact of federally subsidized transit is not
unique to rail systems. Just as cities lined up in the 1950s for
federal funding to build high-rise public housing projects that
later undermined urban quality of life, today cities queue for
federal money to build rail lines that were obsolete decades ago. Professor
John Kain, former chair of the Economics Department at Harvard
University, says the rush to build rail is due to "Boosterism,
appeals to civic pride, the self interest of owners of CBD (central
business district) and other strategically located properties, and
a fondness of politicians for building monuments...."
Generally, bus-based systems cost less,
move more quickly, and provide comparable or better service than
new urban rail systems. Cities seeking federal largesse to expand
their transit systems would be far better served by less expensive
and more effective bus strategies. This is a lesson that Los
Angeles is learning, perhaps too late. Despite the more than $5
billion spent to construct two light rail lines, one metro line,
and six commuter rail lines, traffic is worse than it was before
construction began--and transit ridership
has declined . The near-bankrupt public transit agency has
suspended further rail development and is considering a regional
rapid bus program.
Rapid bus systems are also relatively easy
to competitively contract, which greatly reduces costs and hence
subsidies. This makes additional funding available for other
service expansions, fare reductions, or lower taxes. Indeed, many
transit services may be operated profitably. London, England, has
contracted out the entire bus system, which is now profitable for
both capital and operating expenses. Many communities can also
afford less grandiose rapid bus systems without raising taxes. Rail
systems invariably require tax increases, either at the start of
construction or when the community learns that it cannot afford
what is has been promised. It is the promise or threat of such tax
increases that recently induced the citizens of San Antonio,
Portland, St. Louis, Milwaukee, and Miami, among others, to reject
new or extended rail service in their communities.
CONCLUSION
Despite significant infusions of public funding, transit has made
virtually no progress in reducing traffic congestion. Indeed, given
its minuscule market shares, there is virtually no potential for
transit to reduce traffic congestion in today's dispersed,
suburban-oriented cities. Nonetheless, there is significant
potential for transit to serve the public more effectively in the
few niche markets where it might be viable. Two important changes
would help transit better serve the public:
-
Competitive
Contracting. All bus and rail services should be converted
to competitive contracting as quickly as possible. This could allow
a combination of service expansions, fare reductions, and tax
reductions.
-
Alternatives to
Rail. Because of the extremely low densities of U.S. urban
areas, transit's minuscule market shares, and the high costs of
rail lines, rail lines are virtually never cost-effective relative
to other transit solutions. Available capital funding should be
used for the most cost-effective projects that rely on bus rather
than rail technologies, and construction of new urban rail systems
should cease.
The
improved financial performance that would result from such policies
could arrest or even reverse the downward trend in transit's market
share. For the nation's transit riders and taxpayers generally,
this would be good news indeed.
Wendell Cox is principal of the Wendell Cox
Consultancy in St. Louis, Missouri, and a former Visiting Fellow at
The Heritage Foundation.
APPENDIX: The Record on Competitive
Contracting
Competitive contracting has allowed cities
around the world to achieve significant unit cost reductions. Table
4 summarizes the experiences of several cities both here and
abroad.
In
Europe, the European Union (EU) is encouraging the conversion of
public transit systems to competitive contracting. According to an
EU policy report:
The
concession system (competitive contracting)--where services are
subject to open contract but within a defined operational
framework--is well suited to providing an environment which gives
incentives to operators to raise standards whilst safeguarding
system integration which is particularly important to urban and
regional transport. The Commission...will look at ways of promoting
the concession (competitive contracting) system.
Throughout the world, cities have
converted their transit systems to encourage competition and
competitive pricing.
London.
London has converted its entire bus system to competitive
contracting. London Transport (LT) has the developed world's
largest public transit bus system. With approximately 6,000 buses,
its system is roughly double the size of New York City's. Under a
parliamentary mandate, LT competitively contracted all of its bus
services over the period from 1985 to 1999. In 1997, LT's bus
system operated at a profit; in addition, the taxpaying, private
operating companies that operate the bus lines pay taxes on their
profits. The results of competition in London between 1985 and 1999
attest to the benefits of privatization:
- Services have been expanded 29 percent
over 12 years, while total operating expenses have been reduced 31
percent (adjusted for inflation).
- Costs per vehicle mile have dropped 46
percent, which is an annual cost per mile reduction of 4.4
percent.
Initially, a public operator won more than
half of the competitive contracts, but the company was later
divided into 11 separate firms and sold to private investors
(including management and employee buyouts). These companies
continue to operate most of the service at market rates.
Copenhagen. Copenhagen converted its
entire bus system to competitive contracting. The Danish parliament
mandated the conversion to competitive contracting in 1989, and it
has since been completed. Copenhagen Transport administers a public
transit system of 1,100 buses, making its system similar in size to
that of Washington, D.C. More than 20 operators provide service
under competitive contracts. The rate paid for non-competitive
services (provided until conversion by the former public monopoly)
is limited to the average rate paid to contractors.
Inflation-adjusted bus costs per mile have dropped nearly 20
percent since before the conversion.
Stockholm. Beginning in 1993, Stockholm
converted all of its bus and metro
services to competitive contracting. The public transit system
consists of 2,000 buses and 900 rail cars, and its annual ridership
is comparable to that of Chicago, Portland, and Seattle combined.
According to the public transit agency, "Quality has, at a minimum,
been retained unchanged." Overall system costs per
person mile have declined 20 percent.
Melbourne. The Victoria state government
competitively contracted the entire Melbourne public bus system in
1993. Cost savings have been achieved, and the government has been
able to avoid the expense of renewing the bus fleet. The light rail
and commuter rail systems have recently been competitively
contracted.
Auckland, New
Zealand. Competitive contracting of virtually all transit
services has resulted in 16.5 percent more service, while overall
costs have declined by 21.2 percent--a 33.5 percent reduction in
cost per mile.
San
Diego. San Diego has converted 43 percent of its bus
system to competitive contracting since 1979 and is continuing the
conversion process at a rate that guarantees the jobs of present
public transit agency employees. There have been no layoffs. More
than 100 buses are now competitively contracted.
- In the competitive environment, the
inflation-adjusted, system-wide bus costs per vehicle hour have
dropped 41 percent. From 1979 to 1996, bus costs were $475 million
less than if costs had risen at industry rates. This is nearly $100
million more than San Diego spent to build its first two light rail lines. These savings have
made it possible for the system to increase bus service levels by
82 percent since 1979, while the bus service budget increased by
only 7 percent.
- "Ripple effect" savings have reduced the
costs of non-competitive service by 36 percent per vehicle hour.
The former monopoly, San Diego Transit, has won competitive
contracts.
Las
Vegas. Fast-growing Las Vegas has converted its entire
public transit system from a private monopoly operation to
competitive contracting--the first such complete conversion in a
major U.S. urban area. Ridership has risen by approximately 300
percent since competitive contracting began, placing Las Vegas
among the top 25 U.S. urban areas in public transit ridership. The
total conversion of the public transit system was immediate. In the
first year of operations, total operating expenditures rose 135
percent, while service levels were increased by 243 percent, for an
inflation-adjusted cost per vehicle reduction of 33.3 percent.
Indianapolis. Indianapolis contracts 70
percent of its bus system competitively. The public operator won a
major contract by reducing costs per hour by 22 percent. Through
competitive contracting, Indianapolis increased bus service levels
by 38.4 percent, while total inflation-adjusted operating costs
increased only 8.5 percent between 1994 and 1996.
Denver.
A 1988 Colorado state law required a 20 percent conversion of
Denver's Regional Transportation District (RTD) bus service to
competitive contracting. More than 180 buses are now competitively
contracted. In 1999, Governor Bill Owens signed a bill requiring
that the competitive contracting mandate be expanded to 35 percent
by March 2000.
-
Since beginning competitive contracting,
RTD has increased bus service levels by 25.6 percent, while total
inflation-adjusted operating costs have increased only 3.0 percent
between 1988 and 1995. In contrast, during the six years before
competitive contracting, operating costs rose 18.8 percent, while
service levels increased 17.5 percent.
-
"Ripple effect" savings have reduced the
inflation-adjusted costs of non-competitive service by 11 percent
per hour.
-
A new procurement effort in 1999 is
expected to reduce costs by another 15 percent as a result of
intensified competition. Cost savings from the program's inception
to the conclusion of current contracts are estimated to reach $140
million.
Los
Angeles. More than 20 percent of Los Angeles' bus service
is now competitively contracted. With 550 buses run competitively,
Los Angeles has more competitively contracted buses than any other
U.S. metropolitan area, operating approximately the same number of
buses as the entire St. Louis or Portland transit systems. In the
late 1980s, Los Angeles competitively contracted public transit
routes that were threatened with cancellation due to financial
constraints. Ridership on the competitively contracted routes
increased 150 percent while other routes' ridership declined
throughout Los Angeles. In an independent audit, Price Waterhouse
reported cost savings of 60 percent per mile as well as improved
service quality. In addition, fares on the competitively contracted
services stayed lower than those on the regional system.