Competition: The Real Solution to Public Transit’s “Crisis”

Pennsylvania’s two major public transit agencies–the Philadelphia-based Southeastern Pennsylvania Transportation Authority (SEPTA) and the Pittsburgh-based Port Authority Transit (PAT)–are facing a financial crisis. But it’s not due to a lack of taxpayer funding.

Rather, public transportation’s “crisis” developed because many of Pennsylvania’s political leaders, transportation officials, and transit advocates seem to have a blind faith in “salvation through subsidy.” To its own detriment, public transit policy in Pennsylvania has generally ignored innovative, competitive alternatives from across the United States and around the world that have improved transit service at lower costs.

For too long, SEPTA and PAT (and to a lesser extent, a number of Pennsylvania’s smaller public transit systems) have been trapped in a vicious cycle of service cuts, fare increases, and pleas for higher taxpayer subsidies. Things are no different this year, as SEPTA faces an estimated budget shortfall of $62 million, while PAT projects a $30 million deficit. For his part, Gov. Ed Rendell has rejected short-term fixes offered by the Republican-controlled General Assembly, instead favoring a “permanent” solution to the issue that would likely raise taxes and fees on mostly non-transit users.

However, none of the preceding alternatives is a viable long-term solution for Pennsylvania. Raising taxes and fees to provide more transit funding would not only be yet another drag on Pennsylvania’s still-stagnant economy, but also would reward SEPTA and PAT for their inability to live within their means and allow them to avoid difficult decisions on how to better allocate the resources they already receive. And hiking fares and cutting service just penalizes commuters who depend on public transit as their primary source of transportation.

So what can Pennsylvania policymakers do to rescue SEPTA and PAT from their death spiral? First, many mass transit officials and advocates must come to grips with the fact that no public transit system, no matter how lavishly funded or extensive in service, is going to displace the private automobile as the means of transportation for the vast majority of commuters.

For example, in 2001, according to the National Transit Database, state taxpayers provided $468.1 million (44.2 percent) of the operating and capital funds expended by SEPTA and $184.4 million (49.2 percent) of the operating and capital funds expended by PAT. Yet public transit’s 2001 share of urban travel was no greater than 2.84 percent of the market in the Philadelphia metro area and no greater than 1.98 percent of the market in the Pittsburgh metro area, as calculated by internationally renowned transit expert Wendell Cox.

Still, public transit can play a substantive role in Pennsylvania. To that end, the policy that American cities like San Diego, Denver, Los Angeles, San Francisco and Boston, as well as foreign cities such as London, Copenhagen, Stockholm, Melbourne and Tokyo, have successfully embraced is competitive contracting of transit services.

As governments–and taxpayers–around the world tired of the escalating costs of monopoly public transit systems, they responded by inviting private companies to submit proposals to operate all or part of their service. Government determines service levels, route selection, fare schedules, safety requirements and other policies, and private and public entities compete to provide the specified service for a fixed period of time. Contracts go to the lowest, most qualified and responsible bidder, and that bidder is monitored throughout the contract to ensure compliance.

Competitive contracting has produced positive results or American and foreign transit agencies. The quality of competitively bid transit has been found to be equal to or better than that provided previously, and ridership has generally risen as cost savings allow for expanded service. According to Cox, direct savings from competitive contracting have ranged from 20 to 60 percent over the former non-competitive service.

Of course, it will not be easy for SEPTA and PAT to change how they do business and embrace competitive contracting on a scale that could significantly reduce overall costs and improve service. This is so in large part because many powerful interests benefit from the current, predominately non-competitive system—not least the public employee unions representing transit workers.

To surmount the obstacles blocking real reform of how public transit operates, Pennsylvania can begin by looking to Colorado, which enacted a law mandating competitive contracting in 1988. Between 1988 and 2002, Denver’s Regional Transportation District (RTD) achieved unit cost savings of 30 percent and a 90 percent increase in service levels–in marked contrast to the 33 percent cost increase and 13 percent decline in service levels for the 10 years prior to the imposition of contracting.

Pennsylvania policymakers must break the cycle of subsidy and failure that has ensnared SEPTA, PAT, taxpayers and transit commuters. Gov. Rendell is understandably proud of how his “strategic sourcing” program has reduced costs for state taxpayers on items that government purchases. He could be prouder still if he and legislative leaders can find a way to use that same competitive model to reduce the cost and improve the quality of public transit service for Pennsylvanians.

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Grant R. Gulibon is senior policy analyst with the Commonwealth Foundation (, an independent public policy research and educational institute based in Harrisburg, PA. Permission is hereby granted to reprint in whole or in part, provided the author and his affiliation are cited.