Testimony Before the Metro Board of Commissioners

Chairman Watson and Honorable Members of the Board of Commissioners:

Thank you for the opportunity to submit my comments about the upcoming sales tax vote in Saint Louis County, the proposed service cuts if the tax increase does not pass, and more. This testimony follows up on comments I made last month, at Metro’s invitation, at the Missouri Public Transit Association’s convention. The primary point of this testimony is not to comment on the proposed service cuts, but to suggest alternative means of financing and providing mass transit in general. These ideas will hopefully be given consideration, whether or not voters pass the sales tax increase, although they may become imperative should the measure be defeated.

Before I discuss alternative provision of transit, I would briefly like to consider the possibility of fare increases. I am aware that transit is subsidized everywhere, to varying degrees, and I agree that society as a whole gains from effective mass transit. However, there is nothing wrong with making the riders of the system pay as much of the cost of the services they use as reasonably possible. In years past, on numerous occasions, I have heard Metro officials explain the cost and demand curve of a fare increase. I understand and appreciate that, in the past, fare increases were inevitably met with substantial ridership reductions. However, these past fare increases also occurred during a prolonged period of remarkably stable and inexpensive oil and gas prices. When the cost of ridership increased then, potential riders reconsidered the cost equation of transit versus driving. In many of those cases, fare increases led riders to re-evaluate the cost of driving and decide in favor of driving, rather than using mass transit.

I propose to you, in light of the sharp increases in the price of gasoline during the past three years, and the prospect that gas prices will likely remain at a significantly higher level than their average just a few years ago (even considering the recent welcome reduction downward from $4 per gallon), that the vast majority of the system’s current riders would continue to use Metro’s buses and light rail after a fare increase. Fare increases to $2.50 per bus ticket, or $1 for a transfer, or $3 to ride light rail, are still very inexpensive when the overall costs of driving and parking are computed in an era of $3-per-gallon gas.

As I stated earlier, it’s a good policy to require the users of a service to pay for it. In some government-based examples, such as home inspection fees or park facility rental fees, it is theoretically possible to recover close to 100 percent of the cost of a particular service. For others, such as police protection and urban mass transit, it is either theoretically impossible or completely unrealistic to recover 100 percent. In the case of police protection, recovery is impossible because it is morally and logically unsound to charge or tax someone more because they might require additional police protection — e.g., someone who lives in a violent neighborhood. As for mass transit, if you charged the full cost recovery of the service, you would almost certainly price out some of the people who need the service the most. But, keeping that fact in mind, Metro should still recover as much of the cost of services as possible from the people who use the service. Using Metro’s own 2006 data, taxpayers subsidized every systemwide passenger boarding to the amount of $2.46. It seems simply absurd to argue that those taxpayers who do not use transit do not already give enough money to those who do. While it is reasonable to subsidize a single parent who needs mass transit to get to and from work, it is just as unreasonable to subsidize a Cardinals fan or Mardi Gras paradegoer. Striking the right balance might be a difficult task for Metro, but relying solely on increased subsidies is unfair, and — by increasing tax rates — harmful to our economy. One potential way to strike this balance could be to increase the cost of individual tickets more than the cost of monthly passes. That way, regular riders who depend on mass transit would not be priced out of the system, and would still be able to purchase affordable monthly passes.

The most important long-run decision for Metro, though, is not a fare increase. Rather, officials should consider whether Metro is willing to change the fundamental way it provides transit, and to consider the opportunities presented by private financing and private partnerships. The Denver Regional Transportation District provides 46 percent of its fixed-route bus services and all of its door-to-door services for the disabled through competitive contracting. This model allows a transit agency to determine the scope and goals of service provision, such as bus routes and preferred schedules, then invite private businesses to bid on performing that service.

Nobody is suggesting that private businesses are going to magically turn a profit on these routes. Instead, to quote David Horner, Chief Counsel to the Federal Transit Administration in his April 17, 2007, testimony before Congress, “Private operators then compete for the opportunity to provide services not by bidding up the concession payment but by bidding down the subsidy.” He terms the use of private companies to provide transit as “subsidy minimization.” While this differs from many road or bridge partnerships in which private service providers often make substantial up-front payments to governments, it nonetheless can save taxpayers significant sums of money. A study by Wendell Cox found that competitive contracting saved the Denver RTD $101 million between 1989 (when they began the program) and 1998. Las Vegas has also made extensive use of competitive contracting in its provision of mass transit. One of America’s fastest growing cities, Las Vegas contracts out the majority of its bus services to private providers.

Denver is going even further with its radical changes to transit provision. In the summer of 2008, Denver RTD issued a request for qualifications from contractors to build four new commuter rail lines. This was the city’s opening step in using private companies to design, build, finance, operate, and maintain an expanded light rail and commuter rail system for Denver. The first example of the use of private partnerships in U.S. light rail provision was the Hudson-Bergen line in New Jersey. According to Mr. Horner’s testimony, that private partnership resulted in the light rail line entering service five years ahead of schedule, with an estimated cost savings of up to $345 million. While there may be statutory limits and prohibitions to what Metro can do in this regard, we all know it only takes political will and effort to change those regulations. More importantly, it takes creativity, a nurturing of partnerships, and a willingness to work with the private sector to rethink how transit is provided in Saint Louis.

Metro knows how important federal funding will be in making the desired expansion of MetroLink a reality. Comments made by federal officials at an event commemorating the 15th anniversary of MetroLink, at Washington University this summer, as well as Mr. Horner’s testimony, make clear that large-scale transit capital projects involving private partnerships will receive favorable treatment and have a better chance of obtaining the necessary federal funds. Competitively contracted bus–rapid transit, though, could well serve the transit needs of the suburbs more cost-effectively than expanded light rail. As traffic moves back onto I-64 in 2010, improvements made to the arterial roads during the closure — including traffic light synchronization — will allow buses to serve the suburbs’ commuting needs better than before.

Missouri and Illinois could be on the forefront of private partnerships in mass transit. Whether or not the voters of Saint Louis County pass the sales tax, I recommend that Metro strongly consider the possibilities offered by competitive contracting and private partnerships.

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