Fixing Transit: The Case for Privatisation

July 31, 2012

Free Market Foundation

America’s experiment with government ownership of urban transit systems has proven to be a disaster, says Randal O’Toole, a senior fellow with the Cato Institute.

Since Congress began giving states and cities incentives to take over private transit systems in 1964, worker productivity the number of transit riders carried per worker has declined by more than 50 per cent.

The amount of energy required to carry one bus rider one mile has increased by more than 75 per cent.

The inflation-adjusted cost per transit trip has nearly tripled, even as fares per trip slightly declined.

And, despite hundreds of billions of dollars of subsidies, the number of transit trips per urban resident declined from more than 60 trips per year in 1964 to 45 in 2008.

Largely because of government ownership, the transit industry today is beset by a series of interminable crises. Recent declines in the tax revenues used to support transit have forced major cuts in transit services in the vast majority of urban areas. Transit infrastructure especially rail infrastructure is steadily deteriorating, and the money transit agencies spend on maintenance is not even enough to keep it in its current state of poor repair. And transit agencies have agreed to employee pension and health care plans that impose billions of dollars of unfunded liabilities on taxpayers, says O’Toole.

Transit advocates propose to solve these problems with even more subsidies. A better solution is to privatise transit. Private transit providers will provide efficient transit services that go where people want to go. In order for privatisation to take place, Congress and the states must stop giving transit agencies incentives to waste money on high-cost transit technologies.

Source: Randal O’Toole, Fixing Transit: The Case for Privatization, Cato Institute, November 10, 2010.

For text: http://www.cato.org/pubs/pas/PA670.pdf

For more on Privatization Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=37

First published by the National Center for Policy Analysis, United States

FMF Policy Bulletin/ 23 November 2010