Could Privatization Solve Birmingham’s Transit Woes?

The Birmingham Transit System has been in the news again lately, once again. Faced with a funding crisis, it threatens to close down several lines unless Birmingham comes up with another chunk of money. The conventional wisdom has it that, if only the transit system had a permanent funding source, we could have a world class transit system and avoid these continuing crises.  While I believe a functioning transit system is vital to our economy, I am very skeptical of the idea that throwing more public money and subsidies will really make it better. A heavily footnoted recent study released by the Libertarian CATO institute makes a lot of sense to me on this matter.

This study makes a strong case that subsidized transit systems are not the panacea for what ails us, costing much more per passenger mile and polluting more than any other form of transportation in use, including automobiles. They make a good case for privatizing transit, arguing that public subsidy encourages inefficiency and waste and does not serve its target population as well as private entity would while costing more than any other form of transport:

Today, urban transit is the most expensive way of moving people in the United States. Airlines can transport people at a cost of less than 15 cents per passenger mile, barely a penny of which is subsidized. Driving costs less than 23 cents per passenger mile, which also includes about a penny of subsidy. Socialized Amtrak costs close to 60 cents per passenger mile, about half of which is subsidized. But urban transit costs nearly one dollar per passenger mile, with fares covering only 21 cents
per passenger mile and subsidies paying for the rest.

Many advocates of subsidizing public transit argue it much more energy efficient than automobiles. The actual truth may surprise you:

Far from being an environmental panacea, transit energy efficiencies have … dramatically declined. Between 1970 and 2008, the amount of energy used to move a passenger one mile by automobile declined by nearly 30 percent, but the amount used by transit buses increased by 76 percent and the amount by light- and heavy-rail transit increased by 17 percent.  In 2008, transit used an average of
3,360 British thermal units (BTUs) per passenger mile, while passenger cars used an average of 3,440.  This is hardly a big enough difference to justify huge subsidies to transit on the basis of energy savings, especially since energy efficiencies are rapidly improving.

Other problems with public transit include a lack of innovation, an explosion of debt, pension liabilities, declining transit worker productivity per passenger mile,  rising operating costs and a built in disincentive to maintain the system. There is also a tendency to promote large visible systems in lieu of smaller more efficient systems that would do the job better.

The article goes on to make a strong case for privatization. It includes several examples of successful private systems that serve the people better at lower costs. One that might work well in the Birmingham area is a “jitney” system, like the ones that exist in Atlantic City and Puerto Rico (emphasis mine):

The Atlantic City Jitney Association is a group of private bus owners that operate scheduled service on eight routes in Atlantic City. Four of the routes connect the New Jersey Transit rail station with hotels  and, being subsidized by the hotels, charge no fares. The other four routes charge fares of $2.25.91 The jitneys are all 13-passenger minibuses, individually owned by their operators, which run 24 hours a day. The association was first created in 1915 and claims to be “the longest running non subsidized transit company in America.”

A more extensive jitney or shared taxi service is provided by the públicos, or public cars, of Puerto Rico. Like the Atlantic City jitneys, they tend to be individually owned and most are 17-passenger vans. Routes and fares are fixed by a public service commission, and the públicos travel both within and between cities. Although San Juan has its own public bus and rail system and several other Puerto Rico cities have public buses, the públicos carry more people more passenger miles each year than all the public transit services combined. Público fares average $1.02 per trip, about twice the fares on San Juan’s public buses.

So, the people pr Puerto Rico are willing to pay a higher fare to ride the private system. Could it be because the service is better?

Could something like this work to reduce congestion on Highway 280:

One line that is more upscale is the Hampton Jitney, a bus service that has connected Manhattan with wealthy Long Island enclaves for more than 30 years. Offering comfortable long-distance buses, some of which have two-and-one seating and chef’s galleys, and charging around $24 per one way trip, the Hampton Jitney attracts 600,000 passengers per year, belying the claim often made by rail advocates that welloff people will only ride trains, not buses.

The case for privatization, supported by the  article, goes like this:

  • Transit productivity has declined because transit managers are no longer obligated to ensure that revenues cover costs. In fact, in the world of government, agency managers are respected for having larger budgets, which leads transit managers to use tools and techniques that actually reduce  productivity.
  • Transit’s tax traumas during the recession are typical of government agencies that create new programs during boom periods that are not financially sustainable in the long run. Private businesses do the same thing, but are able to slough off marginal operations during recessions. Public agencies have a difficult time doing so because each program and each transit line has a built-in political constituency demanding continued subsidies.
  • Public agencies are also more likely to run up debt because political time horizons are so short: what an agency provides today is much more important than what that service will cost tomorrow. This is especially true when it comes to pensions and other worker benefits whose true costs can be postponed to the politically distant future.
  • The tendency to build expensive infrastructure whose maintenance cannot be supported by available revenues is a particular government trait. As one official at the U.S. Department of Transportation says, politicians “like ribbons, not brooms.” In other words, they like funding highly visible capital projects, but they gain little from funding the maintenance of those projects.
  • The failure to innovate and the tendency to turn to social engineering when people will not behave the  way planners want are inconsistent with the values of a free society.

I realize that this will go against the grain of many people, but we need to consider all the facts before blindly committing to  conventional wisdom. So, if for those of you who agree that a better transit system is needed to support economic development in the Birmingham-Hoover metro area, I strongly suggest you read this study. It may well be that the better solution would be to simply do away with the monopoly the Birmingham transit system enjoys and see what happens. I predict several new businesses would spring up to better serve those who do not drive more efficiently and at a lower cost. It may even reduce the need for that expensive elevated highway proposed for Highway 280!

One comment

  1. Awesome post. I couldn’t agree more. Having the option of a viable mass transit system would be great but public transit is generally a waste of money. There’s currently public transit on 280 but it doesn’t go all the way to Greystone! It’s totally useless to the majority of 280 commuters. A private system would have to plan its routes according to what’s actually useful.

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