Policy Study

Fostering Commercial Transit

Alternatives in Greater Los Angeles

Executive Summary

As Los Angeles grapples with traffic and related air pollution problems, congestion pricing-tolls that vary by time-of-day, depending upon traffic levels-may be introduced to reduce congestion and the air pollution it generates. Congestion pricing will likely foster a mix of commercial transit alternatives to serve those who find automobile usage too costly. Regulatory and other barriers, however, currently stand in the way of expanded private transit services in Southern California.

California communities would benefit from expanded commercial transit options, especially as congestion tolls are introduced.

Expanding transit options would:

  • provide back-up transportation for those priced off of roads;
  • reduce air pollution and energy consumption as motorists switch to vans and buspools;
  • lower public and private transit costs and increase productivity as a result of transit competition;
  • increase the array of low-cost transit options, giving low-income households affordable access to more potential work sites.

Potential transit options abound-including shared-ride taxis, dial-a-ride vans, jitneys, and commercial bus services. With few exceptions these transit options are either heavily regulated or barred in Southern California. Deregulation is necessary to increase the supply of commercial transit services. Experiences with taxi deregulation in other U.S. cities show that customers are usually rewarded with more travel options and improved services, at roughly the same fares as before.

Local, state, and federal barriers currently impede expansion of commercial transit options. The following local measures should be implemented to overcome these barriers:

  • lift local controls over market entry, ride-sharing, and pricing of paratransit services;
  • establish zone fares to allow the fair pricing of shared-ride services;
  • establish a county-wide Paratransit Authority to consolidate all county regulations into a single ordinance.

In addition, state regulations should:

  • set service standards for all passenger services and allow for open competition among all providers that meet these standards;
  • set and enforce, perhaps with congestion toll proceeds, regulations regarding minimum insurance levels, as well as driver and vehicle fitness;
  • relax requirements governing worker’s compensation and minimum-liability insurance;
  • allow employment-related vanpools to operate on a for-profit basis and serve multiple destinations.

At the federal level, labor protection regulations, such as Section 13(c) of the Federal Transit Act, continue to shield public-transit operators from competition and thus stand as significant barriers to expanded commercial services. These should be repealed. Other federal programs that should be reformed include: capital and operating assistance that provide public operators with an unfair competitive advantage; local matching biases that favor the use of public versus private transit vehicles; administrative and reporting requirements that are particularly onerous to small firms; and some OSHA and vehicle emission standards that, because they are not enforced as stringently against independent operators, place larger commercial operators at a competitive disadvantage.

Regulatory reforms are not the only way to stimulate commercial transit. One key deterrent to serving non-airport destinations with shuttle-type services is the prevalence of free or subsidized parking throughout the Los Angeles basin. Charging employees for parking would clear the way for firms like Super Shuttle and Prime Time to expand operations to downtown and elsewhere. Other measures that could stimulate more commercial transit include: HOV lanes; the development of advanced automated technologies, such as vehicle tracking and dispatching systems; and use of user-side subsidies for the transit-needy. Los Angeles’s Metrorail line and other mainline service (like busways) could also encourage paratransit firms to begin operating feeder runs.

Though these actions are important, transit regulatory reform should clearly be the centerpiece of policy action to stimulate commercial transit in greater Los Angeles. Above all, congestion pricing would likely do more to stimulate transit usage than any other single factor.