Cities use private firms to fill transit gaps

Urban mass transit -- for the past two decades largely the province of government -- is now seeing growing involvement from private enterprise. In Ann Arbor, Mich., the local transit agency has contracted with a private taxi company to provide rides at night rather than pursue the more costly alternative of running its own buses then.

In Orlando, Fla., an 11-mile rail-like link is being considered to connect Disney World with a commercial district -- a $375 million project that would be almost totally funded by private interests.

In New York City, some 50,000 people a day commute to Manhattan on private subscription buses.

The trend toward private involvement in mass transit has been gradually building at least since the early 1980s. But it has recently accelerated partly as a result of prodding from the Reagan administration and declining government aid for public transit.

The penetration of the private sector is not overwhelming. Businesses still operate less than 5 percent of all urban mass transit in the United States. But that's up from about 1 percent in the late 1970s. Moreover, many transportation experts see private involvement continuing to be a major theme in the 1980s, as cities search for ways to shore up transit systems in the face of stagnating ridership and rising costs.

``We are seeing a true renaissance on the part of the private industry in providing, on a selective basis, transportation services,'' says Kenneth Orski, president of Urban Mobility Corporation, a Washington D.C.-based consulting firm.

The change isn't without controversy, however. To backers -- notably the Reagan administration -- it is a way to spur more efficiency in public transit without siphoning off government funds.

To detractors -- including public-transit managers and union leaders -- it is seen as leading to a patchwork system in which private operators will grab the most profitable routes and leave public agencies servicing low-ridership areas. Critics don't see private business as a replacement for federal aid.

Indeed, the issue has become one more lightning rod in the enduring debate over the administration's attempts to spur greater private-sector involvement in many traditional government activities, ranging from garbage collecting to firefighting.

With mass transit, the administration has been trying to boost business participation partly through jawboning. The Urban Mass Transportation Administration (UMTA), for instance, has adopted a policy requiring public agencies that receive federal funds to allow private operators to bid for contracts when new routes are established or existing ones restructured.

But the UMTA is also studying more stringent actions, including federal legislation that would mandate recipients of federal aid to turn over a percentage of their operations to private business.

Even without these measures, however, pressure has been building on public-transit agencies to economize in the face of freezes or cuts in federal assistance.

``The issue is how much service can be put out for how much money,'' says Ralph Stanley, UMTA administrator. ``When you have spent $43 billion in 15 years and seen the number of urban trips go down . . . it is clear more subsidies aren't going to produce more riders.''

Private operators are making the biggest inroads in areas where public systems have struggled the most. This includes in suburbs, in transporting special riders such as the handicapped, and along some long-distance commuter routes. Private operators can often tailor their services better to these riders' unusual demands than public-transit agencies, with their fixed-route services.

Private services are also thriving in many Sunbelt areas -- Texas, Arizona, and southern California -- where transportation needs are growing and labor unions aren't entrenched. Yet companies have also gained a toehold in the North, often where public services have been cut back or fares increased. In Chicago, for instance, private buses started several years ago after the financially strapped transit authority raised rail fares. They now carry some 5,000 riders regularly.

And some public-transit agencies are finding it cheaper to contract out services to private providers in outlying areas rather than extend their own lines. Phoenix, Ariz., for example, contracted with a taxi company to provide Sunday service at a cost of some $100,000. Estimated costs for city bus service were $900,000.

Boosters of more ``privitization'' cite studies that show such practices can yield cost savings of 10 to 50 percent. The biggest savings, says Roger Teal of the University of California at Irvine, come when private concerns take over routes in big cities with large transit agencies, where wage rates and bureacracy add to costs.

One other area of growing private-sector involvement is in the financing of transit projects, such as in Orlando, Fla., where commercial interests along transit corridors pitch in development money.

Private-sector involvement in mass transit isn't new. Before World War II, most all transit systems were built and operated by private investors. But that practice ended in the late 1950s with the rise of the automobile and the decline of profits. Local governments eventually took over most systems.

The question now is how far the pendulum will, or should, swing back toward private enterprise. Critics contend that a few successful instances of private participation are no reason for widespread turnover of transportation services to business.

``We strongly object to the administration using the privitization effort to replace the federal transit program,'' says Jack Gilstrap, executive vice-president of the American Public Transit Association.

There is also the concern among some city officials that too much decentralization and competition could lead to many company failures (there have already been a few) and hobble the quality of service. Others don't want Uncle Sam mandating that business get involved.

``Cities are receptive to the idea of public-private coordination,'' says Barbara Harsha, analyst at the National League of Cities. ``But they don't want it rammed down their throats.''

No one is predicting a wholesale return to private enterprise. Mr. Stanley sees the potential for some 20 percent of public transit, particularly in small cities, being handled by private companies and entrepreneurs. But most others consider that way too optimistic.

Mr. Teal, for one, says he believes most of the easy inroads have been made. Up to now, he argues, much of the private penetration has come as a result of expanded transportation services. Now companies are competing more with public agencies for routes, and transit managers and unions are gearing up to hold onto their monopolies.

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