Tuesday, June 7, 2016

D.C. Metro On the Wrong Track: Why Privatize Urban Public Transit Systems

This past weekend was the beginning of the Washington Metropolitan Area Transit Authority's massive SafeTrack program. The purpose of this initiative is that it will attempt to improve the safety and quality of the DC Metro's crumbling rail infrastructure. For those who live in the Washington DC area, such as myself, you already know much of a pain it is to ride the Metro on a normal day.  Now add considerable delays, reductions in service, and shutdowns of stations caused by SafeTrack, and you know that the next nine months of the DC Metro undergoing the SafeTrack initiative are going to cause a whole lot of disturbances and inconveniences. Whether or not the SafeTrack initiative will actually engender significant improvements remains to be seen. What it does signal, though, is the latest in the public sector's failure to provide adequate transit.

Earlier this year, the DC Metro was ranked the best metro system by financial analytics firm SmartAsset. How could I possibly have an issue with the DC Metro, I mean, aside from the service cuts that Metro riders will experience over the next nine months? In 2015, the DC Metro saw the lowest ridership in the past decade, as well as declining customer satisfaction. The WMATA has such an atrocious safety record that the federal government had to step in last year to oversee Metro safety. If you need to know how atrocious the safety is, the Federal Transportation Administration released a report in 2015 showing there were 3,000 serious unresolved maintenance issues, some of them dating back to 2003. The WMATA has a hard time handling snowstorms. Smoke incidents and fires have become more commonplace, as one study showsA 2016 report from consulting firm McKinsey shows that 63 percent of all DC Metro delayed are caused by maintenance issues.

In 2015, Moody's downgraded the WMATA's credit rating from Aa3 to A1 and changed the outlook to negative.  Just last month, Moody's downgraded the credit rating again to A2, but gave WMATA a more stable outlook. Considering the deficits WMATA continues to run and the fact that 78 percent of its operating budget is spent on wages and benefits (the joys of union-induced cost increases!), I'm hardly surprised that the DC Metro budget is unsustainable. On the other hand, the Left-leaning Urban Institute points out that a significant chunk the DC Metro's operating budget comes from local and federal subsidies, which is higher than its Northeastern counterparts. The reason why this is noteworthy is because its translates into less reliable forms of funding than a more steady tax revenue. Conversely, WMATA has had problems for years dealing with a tri-jurisdictional public rail transit system. None of this considers incompetent management, operators running red lights, obsolete rails, or aging rolling stock.

One could argue, much like the Urban Institute, that it's an issue of funding or how splitting funding commitments complicates revenue generation. However, I would posit that the issue is much more profound than that, mainly that the government does not have the same incentives that the private sector would have to improve service quality. Privatizing urban public transit is not a new proposition. The Cato Institute made a case for privatization back in 2010. More recently, a March 2016 working paper from the National Bureau of Economic Research (NBER) found that a completely privatized bus service would have saved $5.1 billion in 2011, which was 30 percent of bus operating expenses that year (Jerch et al., 2016).

Bus lines have the potential to transport more people in an hour than the WMATA's eight-car rail trains. Since buses have lower capital costs and shorter lifespans, they are more able to respond to competitive forces in the market. Being able to adapt is important, especially since transit rail has an issue of being able to adapt. Bus lines are one possibility to adapt. Telecommuting, car-sharing, and carpooling are other possibilities. Once the technology is developed, self-driving cars will render the Metro obsolete. All the Metro does is crowd out the private sector. Instead of implementing SafeTrack or pouring billions into an increasingly insipid infrastructure, what the respective governments should do is stop expanding Metro and get out of the way so the private sector can develop and provide safer, less congested, less costly, and more efficient forms of urban transport.

5-23-2017 Addendum: The Cato Institute comes up with a convincing list of ten reasons as to why we should stop subsidizing public transit. Here is a report the Manhattan Institute released earlier this month, as well as an article from American Enterprise Institute on the costliness and inefficiency that is public transit.

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