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Don't Subsidize Metro. Privatize it!

Over the last several years, Washington DC's Metrorail system has experienced a number of high profile problems, including financial ones. For just one profile of the system's financial problems, the Washington Examiner published an article on October 31, 2016, reported:

"The Washington Metrorail has proposed terminating 1,000 employees as a way to cut costs in fiscal year 2018, when the Washington Metropolitan Area Transit Authority faces a nearly $300 million budget gap.

"The D.C. Metro published a document on Sunday listing its options for continuing operations in the midst of a severe pinch in funding due to significant costs to repair parts of the system. In addition to cutting employees, staffers would lose some or all of their healthcare benefits.

"Rail service would also be more limited, increasing wait times for trains starting in July 2017, when the new fiscal year commences. During peak hours, trains would operate every two to four minutes at stations served by multiple lines. For single line stations, service would take place every eight minutes instead of every six minutes. Rush trains would be completely eliminated."

For another view of the 40 year-old transportation system in a "mid-life crisis," the New York Times reported April 3, 2016, "The capital’s once-glorious subway system, the nation’s second busiest, is short on cash and a terrible mess."

In addition to what Arlington citizens deposit into Metro fare boxes, Arlington County taxpayers contributed over $30.3 million in Fiscal Year 2016 (Table D-1 in the statistical section of Arlington County's FY 2016 Comprehensive Annual Financial Report -- the CAFR -- on the Accounting webpage). Even worse news is that while the overall county budget has increased 4.9% annually since 2001, the Metro subsidy has increased 8.2% annually over the same time period.

Which gets us to a post by Chris Edwards, editor of DownsizingGovernment.org, at the Cato Institute's Cato@Liberty blog on Wednesday. He writes:

"Some members of Congress are considering restructuring DC Metro’s management and oversight. Big reforms are needed given the disastrous service, safety, and financial performance of the system in recent years.

"Why not privatize Metro? Countries around the world have been privatizing their transportation infrastructure in order to improve management and efficiency. Privatizing Metro buses would be straightforward, but even privatizing the subway system would not be an unheard of reform.

"Hong Kong privatized its subway system in 2000. In a recent study on infrastructure, McKinsey reported:

"Hong Kong’s MTR Corporation has defied the odds and delivered significant financial and social benefits: excellent transit, new and vibrant neighborhoods, opportunities for real-estate developers and small businesses, and the conservation of open space. The whole system operates on a self-sustaining basis, without the need for direct taxpayer subsidies.

"MTR’s railway system covers 221 kilometers and is used by more than five million people each weekday. It not only performs well—trains run on schedule 99.9 percent of the time—but actually makes a profit: $1.5 billion in 2014. MTR fares are also relatively low compared with those of metro systems in other developed cities. The average fare for an MTR trip in 2014 was less than $1.00, well under base fares in Tokyo (about $1.50), New York ($2.75), and Stockholm (about $4.00).

"That sounds pretty darn good. The average fare on the DC Metro is about $3. The on-time record of Metro is unclear, but in technical terms I think “crappy” best describes it. Note that Hong Kong’s 99.9 percent on-time record means that “of the average 5.2 million passenger trips made on the MTR heavy rail and light rail networks on each normal weekday, 5.195 million passengers safely reach their destinations within 5 minutes of their scheduled arrival times.” In 2014, “the system ran for 120 consecutive days without a single delay over eight minutes.” Wow."

Edwards concludes, writing:

"The MTR is probably the best-run subway system in the world. The system is an “immaculately clean, well-signposted, cheap, regular, convenient system.” And there’s free Wi-Fi in most stations.

"The system is so admired that MTR has been contracted to run systems in other cities . . . .

"Can we get MTR Corporation to expand into Washington? Metro Board Chairman Jack Evans wants a federal takeover of Metro, but how about a private takeover?"

Earlier today, Jim Bacon, proprietor of the Bacon's Rebellion blog, wrote about Chris Edwards' Cato@Liberty post, and then provided this "bottom line:"

"It would be unrealistic to expect Hong Kong results in in the Washington Metro. For one reason, Hong Kong is far more densely populated and rail is a more attractive option compared to driving. For another, it’s not clear whether Washington Metro could extract the same economic benefit from putting real estate deals together that MTR could. Zoning controls and land use planning may work very differently in the U.S. than in Honk Kong.  But the idea certainly appears to be worth pursuing. If MTR could do no more than bring operational efficiencies to Metro, Virginians would benefit from better service and lower subsidies."

In case you're wondering how Arlington County's Metro subsidy compares to other estimates coming from the Arlington County Board, consider that almost two years ago, we growled about the additional revenue that would accrue if the county could magically increase the office vacancy rate by 10%.  The chair of the county's economic development commission told Arlington County Civic Federation delegates that "an increase of 10% in office occupancy would represent $34 million annually in local tax revenues."

If you think the Metro board of directors should evaluate contracting the Metro system to MTR Corporation, please communicate your opinion to the Arlington County Board. Just click-on the link below:

  • Call the County Board office at (703) 228-3130.

And tell them ACTA sent you.

Kudos to the Cato Institute's Chris Edwards for his timely post.

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