An Argument for Privatizing Transit from a Very Liberal Blogger

Access is important here at Radials. We’ve argued that lack of transit options in major metropolitan areas is a major contributing factor to urban poverty and plays a role in the uneven distribution of economic opportunities between neighborhoods in cities. We’ve talked about the differences between bus rapid transit, light rail, and heavy rail and what it means for the affected constituents. Hell, we’ve even talked about why Americans are so much better at basketball than everyone else and a big part of it has to do with access to training infrastructure. Give a community access to something positive and they’ll always benefit—you could say that’s Radials’ shorthand mantra when it comes to urban policy.

The first topic—transit access—isn’t given enough page space here though, so I’d like to offer an opinion that doesn’t really jive with my overall political philosophy (the good folks over at Market Urbanism are already typing “I told you so”): transit is probably best managed by private industry.

Before everyone lets the nightmare of a Mitt Romney-run subway system run away with them, let me explain what a private transit system would not consist of:

  • Profit

That’s pretty much it. Unless you’re Hong Kong and somehow have made a buck off transporting millions of people for $0.30 a ride you’re most likely providing transit at a loss—and for most major American markets the operational deficits can reach anywhere from 50% to 70%. (Reading about MTR Corporation Limited, the publically traded company that runs HK’s metro system and is also 74% owned by the government of HK is absolutely fascinating so if you have a minute, check out the Wikipedia page.) American transit operators are also heavily subsidized by the FTA and state entities, though many would argue correctly that the amounts distributed by the Federal government and more highway oriented SDOTs have unfairly skewed funding mechanisms towards rural transportation development, thus shoving transit systems into further debt valleys than is proportional plus no one has actually included the social impacts of driving on the country at large in the gasoline tax which means we have an artificially depressed coffer, but anyway. The transportation economist John F. Kain (UT-Austin) argues convincingly that those subsidies are actually better used to pay private operators to do what the MTA, MBTA, LACTA, etc. do currently at a heavy cost to taxpayers: provide transit.

This isn’t unheard of. Traditionally, when a government needs to build a bridge they’ll put a contract out for something called “Design-Bid-Build” which means exactly what it says: a private entity will design the bridge, bid on the contract, and build the bridge. Often they’ll add another stipulation to the contract: Operate. (There are a bunch of other combinations, such as including “Own” which means that the entity quite literally owns the piece of infrastructure.) When you get an operate stipulation in your contract as a private corporation you are entitled to toll revenues in exchange for providing maintenance and upkeep on the bridge (these are called “concession contracts”), all of which is outlined in stacks and stacks of paperwork that, if you work in any city administration office, is the bane of your existence.

This isn’t the only example: Chicago infamously privatized the Skyway; the toll roads near my family home in Orange County are all private operated; bus systems that serve the Orthodox Jewish communities in New York City are contracted out to private transportation operators. Privatization can be a scary prospect for public services, though, and the introduction of any program would need to be ironclad in its dedication to serving wide swaths of communities—the lack of profits would be filled by subsidies at lower levels than states and cities’ are currently distributing because of efficiency gains in switching from a publically operated system to a private one.

I’ll admit that there’s something unnerving for me in writing about the merits of privatizing municipal services. Orange County’s attempt to essentially privatize city government backfired famously, the aforementioned privatization of the Chicago Skyway is not necessarily popular nor effective, and transit privatization has only been applied in smaller communities save for Denver’s bus system which is 50% contracted out. It’s by no stretch of imagination a new concept—people have been clamoring for this brand of privatization for decades and there’s a renewed interest from larger cities (London is the best good example) in at least dipping their toes into transit privatization. In a climate of municipal austerity maybe it’s time to jump in with both feet.


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