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U.S. Regulations Limit Private Transit

Many large, urban communities are interested in offering high-quality low-cost private transit service. But federal regulations and union rules make providing such service cost prohibitive. The following story examines transit service in an Atlanta metro county with the highest percentage of transit-dependent riders in the state. It shows how the private market offered high-quality service but could not succeed under the current regulations.

Clayton County voters were stuck with two mediocre options on November 5th. They could either vote to increase their sales tax by 1% and receive bus service and future high capacity transit, or vote no and receive no service. Consequently, Clayton residents voted for what they viewed as the best subpar option.

Clayton County used to have bus service. Back in 2001 The Clayton County commission entered into a contract with the Georgia Regional Transportation Authority (GRTA) — a statewide entity that provides transit service — to provide fixed-route bus service in Clayton County. In 2001, GRTA contracted with the Metropolitan Atlanta Rapid Transit Authority (MARTA) to run several bus routes in Clayton County. However, in 2004 upon examination of MARTA’s high costs, GRTA opened a competitive request for proposals to solicit alternative bids. At that time First Transit, a private operator, took over operations of the system. While First Transit ran a more efficient, more effective system, some folks clamored for a bigger system. With the assurances of MARTA that it could run a better system, Clayton County commissioners switched back to MARTA service in 2007. Soon after assuming control MARTA significantly increased the cost of providing its service. The Clayton County commission went along with this increase although it took money out of the budget for other priorities. However, after MARTA wanted another significant increase in funds in 2010 to provide the same services, the county commission balked and public transit service was discontinued.

After public transit service was discontinued, private transit services began operations. In 2010 Quick Transit, a private transit service, began operating service along four of the former C-TRAN routes. South Side Transportation and several other companies also began offering transit service in Clayton County using 7-15 person vans. While these companies were able to fill part of the gap in service, most operated illegally and were unable to market themselves. As a result, many Clayton County residents did not know such service existed. Private sector operations are not illegal because of safety or equity issues but because government regulations subject privately run services to pointless regulations such as uniform color and transit vehicle size that make it challenging for private services to compete with government services. Such laws provide government services a near monopoly and guarantee that private agencies will be unable to fill the void.

The best option, short of private service, is contracted service. Many transit agencies throughout the country contract out service. Ridership and cost data show that such service is both cheaper and of better quality. Agencies that contract out service have farebox recovery rates of over 40% while the typical in-house rate is less than 30%. Outside agencies have a higher percentage of their vehicles on time and a smaller breakdown rate. While this option is not as ideal as true private service, it offers significant advantages to the status quo.

 

Dec 17, 2014 | Leave a Comment | by

Metropolitan Planning Organization Long Range Plans Should Focus on Mobility

All metropolitan areas around the country are required to draft a long-range transportation plan. Congress mandated long-range plans when it passed the Intermodal Surface Transportation Equity Act (ISTEA) of 1991. Congress’ intent was for metropolitan areas to plan for the regional movement of people and goods.

Unfortunately, many of today’s regional transportation plans include all sets of non-measurable goals that have nothing to do with transportation. Parts of the planning process have been captured by special interests that are seeking to use transportation funds for non-transportation purposes. Let’s examine one of the more “realistic” plans — Los Angeles — in more detail.

The planning framework is one of the biggest problems. Past plans would focus on quantitative goals to improve mobility such as decreasing the travel time from Los Angeles to Anaheim by five minutes or increasing transit service coverage to 50 percent of the region. But the 2012 plan focuses on “feel-good” goals centered on what political leaders want Los Angeles to become. Further, the plan deemphasizes mobility and congestion relief to focus more on Livability, Prosperity and Sustainability.

Predictably, this lack of focus does little to reduce congestion. Despite spending one half a trillion dollars over the next 20 years, truck delay on freeways is expected to worsen significantly. Truck delay on arterials will also deteriorate significantly. Both freeways and arterials are expected to remain at least as congested as today. The only relief will be in high occupancy vehicle lanes, where congestion will decrease slightly.

Worse, there will be 30 freeway segments where average speeds are less than 15 miles per hour during afternoon rush hour. These slow segments are not just a roadway problem but a transit problem as well. Since many of these freeways lack HOV lanes or express toll lanes, transit buses and vanpools are stuck in the same congested travel as everyone else.

The next problem is state mandates. California SB 375, in particular, makes congestion worse. The bill — The Sustainable Communities Act — sets regional targets for greenhouse gas uses. Yet, most scientists calculate that California has already met the 2025 standards set in the bill. Today’s vehicle fleet generates 98 percent fewer hydrocarbons, 96 percent less carbon monoxide and 90 percent fewer nitrous oxides than vehicles 30 years ago.

The biggest problem may be the region’s funding or lack thereof. SCAG estimates that the L.A. region has $305 billion in current revenue. However, $119 billion of this is local sales tax revenue that is subject to major swings based on the economy. $33 billion of this total is federal funding. Since federal government transportation funding relies on declining fuel tax revenue and general fund bailouts there is no guarantee federal funding will remain consistent after two years time, let alone 20 years. Finally, SCAG is counting on $220 million in new revenue. The assumption that any new revenue sources will be approved is questionable.

So how do we reform the planning process? First, transportation planning should be reformed so the primary goal is mobility. To the extent that environmental issues are real, they can be incorporated into the plan. But they should not unrealistically constrain development. Finally, plans should be required to be fiscally realistic without the need for unrealistically large new revenues.

 

Dec 15, 2014 | Leave a Comment | by

Developing a State Free Market Transportation Policy

In my last post we examined how to create a local free-market transportation policy. This posting will examine how to create a similar policy on the state level where Republicans will control 32 governorships in 2015, almost 2/3 of the U.S. total. Most states lack a comprehensive transportation vision. Many depend on Washington D.C. for more than 50% of their funds. Yet with federal budget challenges, most policy makers expect federal funding to decrease. As a result, states need to create a transportation vision and ensure that they have the budget to implement such a vision.

States should focus on funding statewide assets. What is a statewide asset? Generally, it is a transportation asset that serves intrastate movement. Most national systems which transport people throughout the country transport people throughout the state and qualify as state assets. These systems include Interstate highways and other major roads that are part of the National Highway System, class one railroads and certain aviation routes. Railroads typically are self-funded so states can merely need to coordinate freight needs with the railroads. Intrastate passenger rail services should also receive some state-level funding assuming the corridors are commercially viable. Statewide and regional transit systems also merit some funding, although the majority of funding should come from the regional, county or city level. While it may be popular to fund non-motorized transport, bicycling and walking are primarily local activities that should be funded at the regional, county or local level.

How should states fund such a system? Similar to at the federal level, the most economically efficient method is a user-pay/user-benefit system. For highways this means transitioning from a partial user-pay/user-benefit gas tax system (some of the money gets diverted to other uses) to a complete user-pay/user-benefit mileage based user fee system (MBUF). An MBUF is the best option because it could be set up to include no revenue diversions. Further, it allows states to vary rates based on type of road and level of congestion to provide a more advanced system. Oregon allows its drivers to choose from one of three models. The most advanced option monitors driving habits and charges rates based on the type of road and the time of day. But for those wary of government intrusion Oregon also offers the option of an annual fee with neither destination nor time-of-day monitoring for motorist travel. Oregon also refunds gas tax revenue so motorists are not paying twice.

 

Dec 08, 2014 | Leave a Comment | by

Developing a Local Free Market Transportation Policy

In my previous blog post we examined how to create a national free-market transportation policy. This posting will examine how to create a similar policy on the local level. Unlike the federal and state levels, the make-up of local government varies by location. While major cities, close-in suburbs, and some small towns tend to be under Democratic rule, other suburbs, exurbs and the remainder of small towns tend to be under Republican rule. While Republicans are most likely to adopt free market reforms, moderate Democrats can be convinced to adopt such reforms as well.

Municipalities should focus on funding local assets. A local asset is any transportation infrastructure that serves residents of a city or region. For highways, cities should focus on funding minor arterials and local streets. Regional governments may still fund some freeway and major arterials if these systems move people throughout the region. For passenger railroads and airports, governments may provide some funding if the assets serve a major regional purpose, but such systems are better funded at the national and state level. While freight rail is better funded at the national or state level, regional coordination is important. Local governments are the best units to fund transit systems, although governments should insist on a farebox recovery rate of 50% and a professionally-operated system. Local governments are the best unit to fund bicycling and walking. However, governments should spend transportation resources on bicycling and walking used for transportation purposes not recreational purposes. Recreational uses should be funded by the park/general budget.

How should such a system be funded? We detailed the user-pay/user-benefit argument for highways, aviation and freight rail in the national post and the principle of mileage based user fees (MBUF) in the local post. Transit is best funded by a combination of farebox revenue, value capture and sponsorships. These funding mechanisms typically struggle to provide half of the funds for transit, often because service is priced too low. A better option is charging the full market rate for transit service and offering vouchers for low-income riders. Well-operated transit systems should be able to receive a minimum of 50% of operating expenses from tickets, value-capture and sponsorships. Bicycling and walking are the most challenging modes to fund. Ideally, a city will enact some form of small charge for bicyclists such as a tire fee. While such a sum raises only a small amount of funds it retains the user-pay/user-benefit principal. Using general funds on non-motorized transport may be necessary and is acceptable as long as significant numbers of commuters bike or walk.

 

Dec 01, 2014 | 1 comment | by

Developing a National Market-Oriented Transportation Policy

The recent congressional elections and the Republican’s new majority in the Senate mark a good time to analyze U.S. transportation policy. The U.S. has not had a comprehensive transportation vision since the completion of the Interstate system in 1991. Although the three most recent six-year transportation acts, the Intermodal Surface Transportation Efficiency Act (ISTEA), the Transportation Efficiency Act for the 21st Century (TEA-21) and the Safe, Accountable, Flexible, Efficient, Transportation for Equity Act: A Legacy for Users (SAFETEA-LU) all spent increasing gas tax revenue on transit, non-motorized transit and active transportation, the most recent two-year bill Moving Ahead for Progress in the 21st Century (MAP-21) reversed that trend. With surface transportation policy set to expire in May, policymakers are threatening (promising) a new long-term bill. What aspects should a free market transportation policy on the national level contain?

First, only national systems should be funded. What is a national system? Generally, it is a transportation asset that is not naturally confined to one state. Interstate highways and other major roads that are part of the National Highway System and transport people and goods between various states are national assets. County highways and local streets that move people and goods between counties or cities are not. Class one railroads are national assets (most freight rail is private and does not need or want government funding and interference). Passenger rail that is commercially viable is also a candidate, but the only potential passenger rail line is the Northeast Corridor. Aviation, both passenger and freight, clearly fit the bill. While it has become sexy to fund transit and non-motorized transit from federal funds, both are locally oriented and should be funded at the state, regional, county or local level.

How would such a system be supported? The most economically efficient method is a user-pay/user-benefit system. For highways this means transitioning from a partial user-pay/user-benefit gas tax system (some of the money gets diverted to other uses) to a complete user-pay user-benefit mileage based user fee system. For aviation this means continuing the use of passenger facility charges (PFC) and allowing airports to set whatever PFC level is appropriate. For freight rail this means allowing freight rail lines to self-fund the system without government interference. And for passenger rail, this means only operating service in corridors which are commercially viable.

Next week we will examine transportation policy on a state level.

 

Nov 17, 2014 | 1 comment | by

Concept of Induced Demand Twisted to Promote Environmental Agenda

The concept of induced demand where widening highways increases the number of cars that use those highways is true. However, some smart growth groups are twisting the concept just to validate a goal. Just because more people will use widened highways, improving highways is not always bad policy. In fact widening highways is often the best solution.

Economic researchers have noted the many benefits from highway construction: enhanced economic activity, reduced travel time in the short-run, decreased greenhouse gas emissions in the short-term, improved safety, etc. State Department of Transportations are very aware of induced demand; in most cases they choose to widen the highway because the economic benefits outweigh the increase in additional traffic. Furthermore, highways can be widened without inducing demand by using pricing or tolling.

Robert Cervero of the University of California-Berkeley proved induced demand was rule on selected California highways. But after Cervero’s research there was a proliferation of studies claiming induced demand where the phenomenon was not happening. The problem was so severe that Cervero wrote a paper pointing out some of the research flaws in these subsequent papers. Yet despite a thorough review and a detailed explanation of what is and what is not induced demand, many of the same groups are making many of the same claims. Streetsblog was up in arms last month with the news that a new freeway in Dallas will not decrease the number of lane miles that are congested. A smart growth ally uncovered the project’s environmental impact statement and because area leaders are not talking to the media, Streetsblog is convinced there is some grand cover-up not seen in Texas since the Kennedy assassination.

Let’s take a look and see what the EIS actually says. It details that between 2013 and 2035 traffic speeds on the corridor are going to increase by two miles per hour and that congestion is going to decrease by 7.1%. Considering Texas’ rapid population growth, decreasing congestion is a significant improvement. And the project has many other benefits. The new highway will provide a fixed reliable guideway for express buses and provide a non-congested alternative to emergency vehicles; with the new lanes buses will not be sitting in traffic. These new lanes will make buses more dependable, increasing bus ridership and likely increasing bus options for commuters, something environmental groups should support. The roadway will increase economic development and tax revenues in the city of Dallas. Further, because it is a tollroad, real induced demand will be limited. In fact one way that traffic on I-30, I-35E and I-45 would really decrease is if the new road were free. Why? Because people are more likely to divert to free roads than toll roads and more likely to take additional trips on these roads.

Does Streetsblog really want more free roads? It seems unlikely. Rather some groups have decided that transit expansion is good and any roadway expansion — free roads, tolled roads, priced roads — is bad. If that is your viewpoint, why let the facts concerning induced demand vs. non-induced demand and their relationship to good public policy interfere?

Nov 10, 2014 | Leave a Comment | by

Free Market Approach to Preventing Air Service Monopolies

With the recent consolidations in the U.S. domestic airline industry, airlines’ record profits, and fights over legroom, customers can be forgiven for feeling less than compassionate towards the industry. However, it is important to understand how the airline industry is structured and how to increase competition.

Back in 2008, the aviation industry was in free fall. Every U.S. airline lost money except for Southwest which made a small profit by hedging its fuel prices. While, the great recession was a factor the underlying cause was an excess of carriers serving a smaller flying populace. For example, it was common for four legacy airlines to compete with each other on routes between medium sized cities such as Cleveland and St. Louis. If each of these four airlines was flying six half-empty airplanes between the cities, each airline lost a lot of money. But if only two airlines flew six full planes between the cities those airlines made money. The desire for airlines to increase their market share created this problem. Bankruptcy was a popular option but rarely fixed the problem. Investing in the industry became a joke and many analysts thought the entire industry could fail if it continued along its current path.

As a result the aviation industry turned to larger and larger mergers. Such mergers would strengthen the airlines and remove excess capacity. With the airlines’ balance sheets in the red, the Department of Justice (DOJ) accepted the rationale for mergers. Delta merged with Northwest, United with Continental and American with U.S. Airways. The DOJ attempt to block the American-U.S. Airways merger reeked of politics because the DOJ had allowed the other airlines to merge. Rejecting an American and U.S. Airways merger would create winners and losers. And due to the structure of traditional hub and spoke airlines, most merged airlines kept service to most cities.

As a result the airlines are much healthier financially, ticket prices are higher and planes are fuller. But while some people want to reregulate the industry to solve the problem, the best solution is to user the free market solution to stop monopolistic business practices. Many of the larger airlines have de facto monopolies in their hub markets and in providing service to small cities. Some entity such as a non-profit professional council should monitor airports to ensure that there are no barriers to entry at these airports.

The biggest problems are manifested by a limit on the number of gates, runways and secondary airports. Many airports have fewer gates than they need; larger airlines sometimes rent extra gates to prevent smaller airlines from entering the market; these larger airlines may also work to prevent airports from adding new gates. If airports need gates, the council should be able to issue a non-binding recommendation on adjusting passenger facility charges to build more gates. Many airports need more runways. The FAA could help by speeding up the approval process for a new runway. Extra crowded airports should also have the option to fast track new runway construction. The council should be able to issue a recommendation when this is appropriate. Many cities could use an additional airport. In these cities, existing airport authorities or the airlines often use politics to prevent new gate construction. The council should be able to offer a non-binding resolution suggesting the construction of a second airport. A non-profit council can help reduce monopolistic practices without the burden of onerous government restrictions.

Sep 22, 2014 | Leave a Comment | by

Rate of Global Warming is Slowing and Nobody Knows Why

Despite hype to the contrary, the world has seen a slowdown in the rate of warming over the past few years. The change is causing many scientific organizations to adjust their climate change projections. Late last year the Intergovernmental Panel on Climate Change reduced its projected warming from a range of 0.4 to 1.0 degrees Celsius to 0.3 to 0.7 degrees Celsius between 2016 and 2035. More importantly, nobody seems to know why the warming has slowed.

The leading theory is that the increased heat has been partially absorbed by the ocean. A group at the Scripps Institute suggested the extra heat is being absorbed by the surface waters of the Pacific Ocean. Other scientists suggest that the deeper, colder parts of the ocean are absorbing the heat. Another theory is that active volcanoes are suppressing global warming by spewing ash and gas that reflect the sun’s heat back into space. Some have suggested particulate matter from coal power plants in developing countries spewed into the atmosphere may be reflecting sunlight thereby reducing heat. Others think that an exceptionally active solar cycle may be influencing temperatures.

The scientific method has always been a five-step process involving a question, a research hypothesis, experimentation and data analysis. While most scientists now believe humans play a significant role in global warming, the exact level is up for debate. And past projections have been off sometimes significantly. In one of the first predictions, Dr. James Hansen told Congress in 1988 that the world would warm 1.0 degree Celsius every 20 years until 2050. We now know that figure was 2-3 times too high.

Where does this leave policy makers and citizens? Policy makers should continue to develop free-market oriented solutions to global warming. Some folks favored a carbon tax, but its lack of success in Europe has pushed many towards carbon capture instead. Other potential solutions are worthy of consideration.

At the same time, scientists should emphasize that all predictions are estimates. The earth and its atmosphere are complicated places; we still have a lot to learn on climate change. Everybody should remember that science is not religion; actual facts are needed before a conclusion can be made. There is one thing that we can be certain of today: nobody can predict with 100% accuracy what any aspect of earth, including its climate, will be like in 2050.

Sep 15, 2014 | 4 comments | by

The California High Speed Rail

The California High-Speed Rail Authority just received the green light from the federal Surface Transportation Board to begin building a 114-mile stretch of the planned statewide high-speed rail project. And yet, with the project underway, the agency still doesn’t have a sensible business plan that identifies the source of the funding needed to build and operate the system. The $10 billion authorized by voters when Proposition 1A passed in 2008 won’t cover the costs of constructing the initial segment, between Merced and Bakersfield. When Prop. 1A passed, California was counting on a lot more federal funding, which is extremely unlikely to arrive.

As a result, the rail project will have to rely on state funds. Gov. Jerry Brown and the legislature have agreed to send 25 percent of the state’s cap-and-trade revenue, money that businesses will have to pay to offset emissions, to support the high-speed rail project. However, that money won’t be nearly enough. The plan has already prompted several lawsuits because those funds are supposed to go to projects that actually reduce greenhouse gases, something the high-speed rail line is unlikely to achieve for at least 20 years.

The California High-Speed Rail Authority is also counting on private investors to cover some of the construction costs. But there aren’t any private rail companies lining up to put billions of their own dollars on the line to build sections of the rail system themselves.

One reason for the lack of private interest is dubious ridership forecasts. The rail authority has wildly overestimated its ridership predictions. Recent studies have indicated that ridership estimates are 65 percent to 77 percent too high, and the state will need $120 million to $370 million every year in taxpayer subsidies just to cover the operating costs and financial losses.

Despite the lack of funding to build the system and the annual financial deficits that it will incur if built, the state’s justification for the project is flawed.

Proponents claim that California needs an alternative to planes and cars because airports and highways are at their breaking points. Yet, airlines are buying larger planes and air traffic control modernization — though decades late due to the Federal Aviation Administration’s failures — will increase air travel capacity. Cars offer flexibility that rail cannot. Most rail riders will arrive at a high-speed rail station that is still 20 or 30 miles from their final destination in a Southern California or Central Valley city with limited transit options.

Others point to successful high-speed rail lines in Western Europe and Japan and argue the United States needs to join the club. But those countries built high-speed rail because conventional rail travel was already busting at the seams. And those countries have different spatial structures because they were developed around walking and mass transit. When the Tokyo-Osaka line was built in Japan, fewer than 25 percent of driving-age residents owned a car. The current car ownership rate in California is more than 85 percent.

Passengers are willing to take high-speed rail in Western Europe and Japan because travel times are competitive with cars or planes. But when the High-Speed Rail Authority decided California’s system needed to serve the Central Valley, the two hour, 40 minute trip that voters were promised from Los Angeles to San Francisco turned into a four hour odyssey, which would be much slower than air travel — even factoring in getting to the airport, going through security and managing other possible delays.

Sep 08, 2014 | 2 comments | by

The Importance of Reducing Congestion by Spotlighting One Intersection

Creating a redundant transportation system is crucial to reducing congestion and improving mobility. One of the most important projects in the Atlanta metro area is the reconstruction of the I-285/SR 400 intersection, identified for years as one of the top transportation projects in Georgia. I-285 and SR 400 are the two freeways which provide access to the Perimeter business area, home to the largest concentration of jobs in the Southeast U.S.

The Georgia Department of Transportation (GDOT) has wanted to fix this interchange for years but has lacked the resources. The interchange and collector distributor ramps on SR 400 (totaling a combined $700+ million dollars) were on the 1% transportation special purpose local option sales tax list in 2012. While the interchange had near unanimous support, other projects on the list were controversial causing the tax to fail. However, GDOT still needed to fix the interchange and because of worsening congestion in metro Atlanta it decided to add collector-distributor lanes in addition to the SR 400 ramps. This brought the total cost to $950 billion.

To fund the project the state is going to sell $130 million in bonds, use $81.5 million in gas tax revenue and use a design-build-finance approach with builder contributions to supplement other sources.

But not everybody is happy. Atlanta Urbanist has created a list of bogus reasons to oppose the project.

First, the article claims that the interchange is something Atlanta does not need because new lanes lead to induced demand. But the interchange reconstruction project is not building new lanes; it is rebuilding a functionally obsolete interchange. Second, induced demand is only created when new non-priced lanes are added to growing areas. GDOT has an official policy, adopted in 2007, of adding only priced lanes to Atlanta freeways. The agency is planning on adding priced lanes to both corridors but the variable pricing will prevent induced demand.

Second, the article claims that Georgia has a pedestrian death rate 25% above the national average. This high rate is a problem but we have no idea what is causing the rate without researching the cause. Atlanta Urbanist wants to spend the $950 million on pedestrian improvements. The problem with this logic is that GDOT is using federal gas tax money collected from drivers and intended to be used on highways. Since this money comes from drivers it is only fair it is used on highways. Also, this federal funding is supposed to be used for interstate purposes. There are a large number of vehicles on I-285 and SR 400 from other states such as Florida and North Carolina. I doubt many folks in the metro Atlanta area walked here from another state.

Third, metro Atlanta has a growing senior population and we need ways to better serve them including transit. I agree that Atlanta’s transit service is insufficient. But with most rail lines costing in excess of $2 billion, this is not enough funding to pay for a full line. The interchange rebuild that allows the addition of variably priced lanes will also provide a free virtual guideway for buses and vanpools. In fact, thanks to using managed lanes as a guideway, Atlanta could build and operate a comprehensive bus system for less than a third of the cost of building a comprehensive light rail system. Further, new technology such as the development of automated vehicles may allow seniors to drive longer. While such vehicles are not yet available, they will be in the future.

The I-285-SR 400 interchange project is the biggest bottleneck in the metro Atlanta area. Regardless of what anyone claims, rebuilding the interchange will do more to improve mobility than any other transportation project in Georgia.

Aug 11, 2014 | Leave a Comment | by
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