Commentary

U.S. Regulations Limit Private Transit Services

Many large, urban communities are interested in offering high-quality low-cost private transit service. But federal regulations and union rules make providing such service cost prohibitive. The following story examines transit service in an Atlanta metro county with the highest percentage of transit-dependent riders in the state. It shows how the private market offered high-quality service but could not succeed under the current regulations.

Clayton County voters were stuck with two mediocre options on November 5th. They could either vote to increase their sales tax by 1% and receive bus service and future high capacity transit, or vote no and receive no service. Consequently, Clayton residents voted for what they viewed as the best subpar option.

Clayton County had bus service in the past. Back in 2001 The Clayton County commission entered into a contract with the Georgia Regional Transportation Authority (GRTA)-a statewide entity that provides transit service-to provide fixed-route bus service in Clayton County. In 2001, GRTA contracted with MARTA to run several bus routes in Clayton County. However, in 2004 upon examination of MARTA’s high costs, GRTA opened a competitive request for proposals to solicit alternative bids. At that time First Transit, a private operator, took over operations of the system. While First Transit ran a more efficient, more effective system, some folks clamored for a bigger system. With the assurances of MARTA that it could run a better system, Clayton County commissioners switched back to MARTA service in 2007. Soon after assuming control MARTA significantly increased the cost of providing its service. The Clayton County commission went along with this increase although it took money out of the budget for other priorities. However, after MARTA wanted another significant increase in funds in 2010 to provide the same services, the county commission balked and public transit service was discontinued.

After public transit service was discontinued, private transit services began operations. In 2010 Quick Transit, a private transit service, began operating service along four of the former C-TRAN routes. South Side Transportation and several other companies also began offering transit service in Clayton County using 7-15 person vans. While these companies were able to fill part of the gap in service, most operated illegally and were unable to market themselves. As a result, many Clayton County residents did not know such service existed. Private sector operations are not illegal because of safety or equity issues but because government regulations subject privately run services to pointless regulations such as uniform color and transit vehicle size that make it challenging for private services to compete with government services. Such laws provide government services a near monopoly and guarantee that private agencies will be unable to fill the void.

The best option, short of private service, is contracted service. Many transit agencies throughout the country contract out service. Ridership and cost data show that such service is both cheaper and of better quality. Agencies that contract out service have farebox recovery rates of over 40% while the typical in-house rate is less than 30%. Outside agencies have a higher percentage of their vehicles on time and a smaller breakdown rate. While this option is not as ideal as true private service, it offers significant advantages to the status quo.

Baruch Feigenbaum is assistant director of transportation Policy at Reason Foundation a non-profit think tank advancing free minds and free markets.