Public Transit is in Jeopardy

Metro_Transit-Minneapolis-2005-06-04

Metro_Transit-Minneapolis-2005-06-04

Mitch Bendis

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Ever since the horse-drawn omnibus was introduced in the 1820s, public transportation has been integral in American history. Whether it be by rail, street, or water, the transit of large amounts of individuals over the past two centuries has largely been handled by government. To find an example in your own backyard, look no further than Metro Transit. This public entity manages the Northstar Line commuter train, the light rail system, and buses around the Twin Cities. Even though governments have controlled mass transit almost entirely throughout our country’s history, one must wonder if that is the best option. Could the future of transit be found in the private sector?

Transit authorities nationwide are in serious financial trouble. The Washington, D.C. metro, once heralded as the benchmark that all public transit systems should strive for, is estimated to lose over 150 million dollars by next year. To make matters worse, the D.C. transit authority is requesting $300 million in taxpayer money every year in order to fund operations and stay afloat. The true cherry on top is that since D.C. is a federal district and not an independent state, all of that money will come from federal taxes. This means that loyal taxpayers from Alaska to Florida will foot the bill for municipal financial mismanagement in our nation’s capital.

To be fair, D.C.’s situation is quite extreme. Here at home, however, the problem is not much better. Metro Transit, the Minnesotan governmental body charged with public transportation in the Twin Cities, proudly boasts in its 2016 factbook that they lost 20 million dollars last year. Even with a purported $384 million total revenue, Metro Transit accumulated $404 million in total expenses. A $20,000,000 loss sounds bad, but it only gets worse. Their so-called “revenue” is highly dubious and misleading as more than half of that is funded by the Motor Vehicles Sales Tax. This 6.5% tax is applied to any and all vehicle purchases in the state, be they through a dealership or privately exchanged.

In fact, when ignoring all tax revenue and only focusing on fares and private funding, Metro Transit only raked in about $104 million in 2016. That means the already disappointing $20 million loss is revealed to have been $300 million, a comical amount of money to lose in just one year. This system is completely unsustainable, resulting in sky-high debt accumulated by the state and city governments as they continue to desperately throw money down the drain.

With pressure mounting on state and local governments as transit authorities start to fail, more attention has been given to a possible solution: privatization. Instead of a single government entity planning, supervising, and operating a widespread transit system, allow specialized private companies to instead do the work. The rationale behind such an idea is simple: while governments can operate without worrying about finances, private companies must make a profit. With the incentive to make a profit, a private company would operate a transit system that is efficient, lean, and effective. Thus, privatization would theoretically create a sustainable model for operating mass transit.

Since governments have no incentive to save money, public transportation systems are horribly inefficient. A recent paper published by the National Bureau of Economic Research (NBER) looked at the ramifications of privatizing transit across the country: the paper found that by just privatizing bus service, the nation as a whole would save 5.7 billion dollars a year. In addition, assuming these massive savings would translate into lower bus fares, a privatized bus service could expect an over $500 million gain as a result of more people riding the bus.

Privatizing transit would not compromise safety either. According to the NBER paper, the United Kingdom privatized its bus transportation under the leadership of Margaret Thatcher in the 1980s. While there were many fears at the time about the safety and security of commuters on a private bus, the paper concluded that no significant evidence supported those fears over the last three decades of privatization. In fact, the private bus transportation system in London is highly regarded around the world as reliable, safe, and cost-effective.

In spite of overwhelming evidence that privatization is the solution to public transit stagnation, our nation has been incredibly slow in adopting these changes. Since Americans have known nothing but public mass transit for over two centuries, this resistance to change is understandable. Government reach in transportation is so widespread that the Supreme Court decided in 2015 that Amtrak was a public entity rather than a private company and thus was allowed to continue to operate its monopoly on the railways.

Hopefully, the end of government-operated mass transit will be within our lifetime. The illusion that it is a sustainable way to provide for commuters has been shattered, yet local and state governments continue to grossly mismanage their transportation systems. Privatization is the only way we can pull ourselves out of debt and efficiency by literally saving billions of dollars a year.