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Flaws Cited in Private Mass Transit

Report notes that a city's shift to privatization may cause financial, management problems. MISSING THE BUS

THE move made neither dollars nor sense, as Gary Gleason explains it. He is general manager of the Santa Barbara, Calif., Metropolitan Transit District (MTD) which operates a system of 50 buses. The Urban Mass Transportation Administration (UMTA) had urged his city to contract out a fifth of its bus routes to private companies to qualify for federal operations subsidies. Yet to do so in this case, the city calculated, would have cost $600,000 more. So the city still runs the whole bus system.

The great debate over whether or not turning over the operation of public services to private companies both does the job and helps the taxpayer is far from over. The most that both sides agree on is that the shift makes sense over the short run in some instances.

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The latest report to figure in the discussion is one to be released today by the Economic Policy Institute (EPI). The report focuses solely on mass transit.

Elliott Sclar, one of the three authors of the study, contends that UMTA has gone well beyond its 1964 legislative authority - to urge city transit agencies to turn services over to private operators where feasible.

Instead, says Dr. Sclar, who is a professor of urban planning at Columbia University, the UMTA has launched what he calls an ``ideological crusade.'' The agency is pushing privatization of public transit as if it were ``snake oil that could magically cure all the ills in the public transit system.''

His report contends that the UMTA has taken a carrot-and-stick approach with federal subsidies which over the long run will lead to a deterioration of urban transit systems and less flexibility for public officials.

The shift is also likely to increase rather than decrease operating costs by instituting a less efficient use of public resources, the report says.

UMTA has done a number of studies which argue that the privatization of mass transit has cut costs by 20 to 50 percent. One major spur for the shift back to private hands from the public takeover of urban transit lines during the 1960s and '70s has been declining ridership and mounting deficits.

Stephen Moore, a Heritage Foundation fellow, says that mass transit has actually proved to be one of the most successful areas for privatization.

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``There are some cases where it hasn't worked so well but generally the evidence is very clear that it's saving money,'' he says. ``Whenever something goes wrong with any of these contracts, however, and there's a glitch, the unions just jump on it, saying it shows that privatization doesn't work.''

Mr. Moore says Los Angeles County recently contracted out a portion of its bus service. Costs have been cut as a result, he says, and riders are happier with the service, which occasionally provides such extras as newspapers. The privately run routes, Moore says, are not making money but are losing less of it than when under public operation.

Rider comments have also been favorable in Denver, where a 1988 Colorado law required that 20 percent of the existing city-based transit operation to put out for bid to private contractors by last spring.

Diana Yee, a spokeswoman for the Denver Regional Transportation District, says that savings, however, will be harder to determine: by law Denver has not been allowed to lay off any employees, and the city still retains a number of responsibilities, including the printing of timetables, for the contracted routes.

Also, the city is having trouble reaching the full 20 percent turnover target, according to Ms. Yee. Cost estimates by private contractors on the last group of inter-city routes put up for bid came in higher than city service estimates, she says.

One of the difficulties, says Santa Barbara's Gary Gleason, is that the UMTA requires cities to calculate the ``fully allocated'' costs of insurance, management, and the like, for that portion of the routes to be privately run. Any private bids falling below that public cost figure are up for acceptance.

The formula rarely works out so neatly in practice, says EPI spokesman Roger Hickey. ``When they contract out, cities don't replace or save all of those costs - in some cases they face an even bigger management problem,'' he says.

``In our situation we had to take all our costs and divide by five,'' says Mr. Gleason, who notes that his city has turned services over to private contractors in a number of other areas. ``Yet we know that if we contract out 20 percent of our operation, we don't save 20 percent of our utility bill or of our staff or of the cost of cleaning up bus stops. It might work if you had a larger system of a thousand buses, but this is the difficulty of trying to adopt one policy nationwide. ... The fact that it may work well in many cases but not in Santa Barbara seems to have gotten us in trouble with the government.''

The Bush administration has been less openly enthusiastic than the Reagan administration about privatization. Early next year United States Transportation Secretary Samuel Skinner is due to release a comprehensive outline of the administration's plans for a national transportation policy. EPI hopes by its current report to have some input in the choices made.

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