Recently I've been pointing to privately owned and operated bus service as a way to keep transit running. I'm not exactly happy about this, but I want to get where I'm going without too much waiting or crowding. Beyond that, I want to keep increasing the competitiveness of transit in order to get people out of their cars and fight pollution and carnage, waste and inequity.
I don't want to give you the impression that private buses will necessarily be better than government buses, or that government has no role in transit. On the contrary, we've seen that unregulated transit tends to be restricted to places where it is profitable, undermining our goal of access for all. It is often dangerous, conflicting with our goal of increasing safety, and frequently uncomfortable. Private buses may also be more polluting, and spend a lot of time idling. All these problems decrease the competitive advantage of transit, conflicting with most of our goals.
Some government involvement is definitely needed for transit to serve our goals. In this post I'm going to talk about what government can do to promote coverage. As Jarrett Walker writes (PDF), "Coverage goals are met by the availability of service, regardless of its patronage." Expanding coverage helps provide access for all and improve our proximate goal of competitiveness.
At the most basic level, we can simply divide up the routes into those that have enough profit potential to attract a private operator, and those that don't. The government can operate the unprofitable routes, and license private operators to serve the profitable ones. This is essentially how it works in Rockland County, where the for-profit Rockland Coaches (currently owned by the Scottish conglomerate Stagecoach, doing business as Red and Tan Lines or Coachusa) operates the profitable commuter routes to Manhattan, earning a $9 million profit in 2007 but accepting $4 million in state aid in 2008. The government agency Transport of Rockland operates the unprofitable local routes, receiving more than $13 million in subsidies in 2007 and $16 million in 2008.
That leads us to a question, though: why not just let the government run the profitable routes, and cross-subsidize the unprofitable routes? What if Rockland County took over Red and Tan and merged it with Transport of Rockland? It would have been able to use the $9 million profit from last year to offset the $13 million deficit from the local routes, requiring only $4 million in subsidies. This is essentially what the MTA does with its bus routes: the $1.9 million operating surplus from the M23 is used to cover the $1.6 million operating deficit on the M104 and the $350,000 deficit on the M72.
The problem is that the surplus from profitable routes are not usually as high when they're operated by government agencies. Cost is lower for private operators, in part due to labor issues. They can also charge market prices (like $8.85 for a one-way bus trip from the Port Authority to Nyack), which is very difficult for a public agency to do. It's also a lot harder for a government operator to abandon a route, so the government agencies are much more timid when it comes to expanding routes, knowing that they might be stuck with them for years to come. There is less incentive for them to add extra buses to supplement an existing schedule.
Put this all together, and the government may not actually earn much from profitable transit routes. It may cost just as much to subsidize the unprofitable routes, and the profitable routes may even require subsidies. Because of this, it is often better to simply subsidize the unprofitable routes and leave the profitable ones to private operators.