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Pro: Disney shows it’s high time to privatize mass transit

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Kristina M. Rasmussen
February 23, 2008
EDITOR’S NOTE: The writer is addressing the question, Is the time ripe to privatize our urban mass transit systems?

You might not know it, but Disney does mass transit. That’s right—Walt Disney World visitors are transported through the theme parks and hotels via a bus and monorail system. As riders can attest, using “Walt-style” transit is a friendly, clean and punctual experience. The monorail component alone serves 150,000 riders each day.


Many quasi-governmental authorities also “do” mass transit … they just don’t do it as well. In urban areas especially, complaints about rude service, dirty cars and late arrivals are common and often pervasive. But perhaps the worst charge against public mass transit is its near-constant drain on our tax dollars.


Few transit systems are self-reliant on customer fees. Consider Washington, where Metrorail’s revenue intake from tickets, advertising and other sources covered only 77 percent of its 2007 operating budget. That percentage drops off to 57 percent when bus and disabled-rider service is included. The remaining budget hole is covered by lending and “contributions” from taxpayers.


D.C.’s Metrorail isn’t an anomaly. According to the National Transit Database, the average transit system only covers 40 percent of its costs from ticket sales.


And with taxpayer wallets to fall back on, public operators don’t have to abide by real-world expectations to perform on-budget. That’s why we should consider bringing the private sector into the transit mix in the form of “competitive contracting” agreements.


Under these arrangements, public agencies maintain control of routes and ticket prices while contracting out aspects of the system—anything from maintenance to marketing.


Qualified bidders that meet cost, performance and safety standards are awarded the job. Contracts are then re-bid on a regular basis, thereby discouraging complacency while allowing new operators the chance to do better.


Competitive contracting isn’t a new idea. Research from the noted international transportation expert Wendell Cox shows how the decision to completely contract out London’s bus service led to a 51 percent drop in cost-per-vehicle-kilometer, which in turn allowed for a 32 percent expansion in service.


Using similar tactics, Copenhagen cut bus costs by 24 percent while increasing service and productivity rates; Stockholm cut costs by 20 percent and delivered similar benefits to passengers.


In the United States, contracting arrangements are common in health and sanitation, but their application to transit is comparatively limited at just 10 percent of all services.


Even with this limited exposure, success stories are piling up quickly. Len Gilroy of the Reason Foundation says, “Cities like Las Vegas, Denver, Boston and San Francisco have successfully used competitive contracting with private-sector providers as a means to improve the quality of public transit services and reduce operating costs, generally on the order of about 30 percent.”


That translates into yearly savings of hundreds of millions of dollars. The benefits of competition go beyond better-running buses and trains. In D.C., a 2002 task force found that private contractors were doing a better job of repairing Metro’s troubled escalators and elevators than internal mechanics.


The major pushback against competitive contracting comes mainly from transit unions and their political allies, who resist reforms to a system that rewards mediocre performance with guaranteed cost-of-living adjustments. Take D.C. again: More than 100 bus and train operators earned more than $100,000 in 2006.


If elected officials keep pushing transit as a transportation mode, taxpayers should demand more use of strategies—such as competitive contracting—that offer us better service for less money.


Complete privatization shouldn’t be dismissed out of hand either. As recently as the 1950s, numerous city transit systems were privately owned and operated.


The folks with the Magic Kingdom probably won’t be giving you a cheery hello on your own local transit system any time soon, but as that popular Disney tune reminds us, our dreams can come true.


Kristina Rasmussen is director of government affairs for the National Taxpayers Union. Readers can write her at NTU, 108 N. Alfred St., Alexandria, VA 22314; Web site: www.ntu.org.

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