Here’s an interesting question for you: Should public transit systems and the public authorities that run them be trying to turn a profit? In other words, at what point should authority heads such as Jay Walder cease running a transportation network as a public good and start running it as a business?
The answer to this question isn’t an easy one in an age of austerity. By and large, public transportation networks are inherently not operated as a business as the service level. In New York, for instance, the MTA runs mostly empty trains at 3 a.m. and allows buses to run routes with a cost-per-passenger high enough to make any private CFO cry. That’s how New York City exists as a huge economic hub and tourist destination today, and that’s how mass transit is operated as a public good.
On the other hand, though, are a few competing demands. First, the MTA must operate these services efficiently through a streamlined bureaucracy and a procurement process that isn’t beset with red tape. Second, it cannot become an organization beholden to pension costs and lifetime benefits. Third, it will require public subsidies from a government whose constituents depend on public transit for their daily lives, and politicians will have to recognize that the MTA or a similarly situated organization may not operate as efficiently as a corporation that answers to stock-holders. The demands are different, and the expected benefits are different.
Recently, a few good minds in the transit realm have been debating the way transit authorities operate. David Levinson has called for financially sustainable mass transit systems while Jarrett Walker has called upon those funding transit systems to better outline their goals. The competing demands of ridership vs. coverage are at odds with financially self-sustaining transit systems. I’ve simplified their arguments, and it’s worth reading their pieces at length because we’re seeing this debate play itself out in real life on Long Island.
The Long Island Bus saga has been a debacle. In its original agreement with Nassau County, the MTA agreed to operate the service as long as the county paid for it. Over the years, the county’s contributions had decreased while the MTA’s had increased, and the authority threatened to pull out of Nassau if County Executive Edward Mangano didn’t agree to upping the county’s contributions from $9 million to $26 million. Mangano called the MTA’s bluff and decided he could run the bus system for less by farming it out to a private company. He claimed no service cuts or fare hikes would follow.
From the start, the privatization process has been a mess. The county used a non-transparent process to pick Veolia, a company with close ties to Mangano’s campaign, and they failed to meet a July deadline for an agreement. The MTA will operate the buses until December 31, and at that point, Nassau County will reduce its contributions to just $2.5 million — $6 million less than the cost of fuel alone. Veolia will then be expected to cover the difference. Without subsidies, no one, including the company’s CEO, knows how.
Earlier this week, Michael Setzer spoke about how the company would save the millions it stands to lose from the MTA and state when it takes over the LI Bus network. “You can’t save $35 million by turning off the lights,” Setzer said. In other words, there’s virtually no way Veolia can operate the bus system with its current route structure and fare system while breaking even or turning a profit.
On their website, if you read closely enough, Veolia has said as much. They are threatening “adjustments” of bus timetables that will reduce frequency, and while they say there is no plan in place to raise fares next year, they also say that “it’s possible that modest service redesigns and fare increases will be recommended.” You can’t just save $35 million by turning off the lights.
Veolia is a private company long used to operate bus systems with large public subsidies. If they can’t turn a profit in Nassau County with a meager subsidy and the current route plan or fare structure, something will have to go. Relatively empty buses that provide a transit lifeline for people who can’t afford anything else will be cut, and fares will go up. A public good won’t be so public any longer.
As this grand experiment rushes toward a launch, we’ll watch Nassau County closely. It could be a model for how transit agencies can operate, but it sounds as though it’s going to be an example in government failure and the decline of a once-proud bus system. Perhaps Nassau County will come to its senses and recognize the purpose of its bus system before it’s too late, but I’m not counting on it.