Urban Renaissance Institute

Lawrence Solomon
The Next City
September 1, 2008

Little wonder that people got off public transit at the first available stop. Transit patronage in the U.S. declined steadily, falling from 114 trips per capita in 1950 to 37 in 1970 to 31 in 1990. Despite $100 billion in federal spending, and billions more from state and local levels on new public-transit systems in Washington, Baltimore, Miami, Portland, Sacramento, San Diego, Los Angeles and elsewhere, and despite continued expansion of the nation’s bus transit system, only two per cent of urban trips now involve public transit, the lowest level on record. More Americans walk or bike to their jobs than use public transit. Throwing money at the problem didn’t help, and probably hurt. For it became more profitable for transit companies to court governments than their customers, and their customers, jilted, took a hike.

Politics takes the driver’s seat

The most successful public transit system in north America has been the Toronto Transit Commission, publicly owned since the early 1920s, and doubly lucky for it. The TTC had no shareholders conscious of the precariousness of their capital, and was outside the reach of GM and its streetcar-scrapping schemes in the 1930s. Because it was bureaucratically run with a secure monopoly, it could invest without trepidation: Before, during and after the Second World War, in decisions it would come to regret, it made extraordinarily large purchases of streetcars that committed it to railed vehicles for years to come.

Because electric vehicles dominated the TTC (downtown had streetcars, electric trolleys and, by the 1950s, subways), and because Toronto didn’t see its downtown decimated as had so many U.S. cities, the TTC remained relatively prosperous, if plodding, for decades. Into the 1960s, it paid taxes into the city’s coffers, and got nicked with franchise-like charges to boot. The city charged $50,000 a year to cart away snow that TTC vehicles had cleared from their tracks, and $11,000 a year for the privilege of bringing customers to the Canadian National Exhibition, a two-week long Toronto summer fair. The TTC remained self-sufficient until 1970.

But the benefits of government ownership were as nothing compared with the detriment of having political masters. Opportunities were missed: Although subways had been built in Europe, the U.S., Asia, Australia and South America in the early part of the century, the complacent TTC failed to build them in Toronto’s dense and highly profitable transit market. And unlike private owners, whose single-minded function would be to maximize the transit company’s success, the function of politicians is to balance transit’s welfare with that of every other political interest. Those other political interests would soon wreck the TTC.

When streetcars came to be seen as passé in Canada in the 1950s and 1960s, or worse, as an obstruction to the automobile driver, their politician-owners, rather than defend the streetcar, played to popular sentiments. The Montreal Transit Commission refused to either sell or donate its discarded streetcars to the many individuals and organizations who requested them, preferring instead to pay to store them before periodically dismantling and burning them in groups. In Toronto, a car rental company owner and opponent of streetcars was installed as TTC commissioner, and he soon announced plans to speed up the destruction of the traffic-jam-causing streetcar: “Overnight, streetcars will disappear from Dupont Street, Davenport Road, and all but a short stretch of Bay Street, thus increasing the capacities of these streets at no expense to motorists,” TTC literature announced. The TTC had become a facilitator to the automobile instead of a competitor.

But the change that would ultimately cripple the TTC was its takeover by metropolitan government, an event whose consequences were little understood yet widely praised for years to come. Metropolitan government “permitted far more comprehensive planning decisions including those involving transportation,” the New York Times pronounced. “Toronto’s transit success is usually traced to one momentous development: the imposition of regional government.” The Washington-based Institute of Rapid Transit enthused that “Toronto has the best combination of public transit facilities of any city in the Western Hemisphere.” Moving Millions, by Stanley Fischler, an authoritative 1979 book on public transit, stated that “Now that it embraced such far-flung and rapidly growing suburban communities, Toronto could decide whether it was prudent to unify them with subway, bus, or streetcar and, with considerably less red tape, turn their dreams into reality.”

The reality was a nightmare. The TTC’s political masters had become suburban politicians, and they would do to the publicly owned TTC what Toronto city council a half-century earlier had done to its predecessor, the Toronto Street Railway: force it to take on unprofitable routes to please political constituencies. The TTC took over private bus companies servicing the suburbs, and near-empty buses started plying suburban routes, giving deserted thoroughfares the same service at off-hours that busier urban routes would expect. The effect was to inflate use of public transit in areas that couldn’t sustain it, and to undermine public transit where it would otherwise be sustainable. Ridership overall increased, creating an illusion of accomplishment, while the day-to-day system became unstable.

As in other cities, people were moving to the suburbs, partly for cleaner air and less congestion, partly because suburban land cost much less, making affordable larger homes on larger parcels of land. Partially offsetting these big benefits were small additional expenses, either in extra gasoline if suburbanites drove to work, or extra transit fares to cover the longer distances if they took the TTC.

But once they had moved, suburbanites — who tended to be wealthier than urban residents — began to clamor for their former neighbors in the city to pay part of their travel costs by abolishing the pay-by-distance system then in place. Five zones, each requiring a fare, were first reduced to three, then to two. With each zone’s elimination, the system lost accountability. With the abolition of the two-fare system in 1973, eliminating altogether the pay-by-distance requirement, the effect on the TTC was immediate and dramatic. Fifty-three million double fares that longer-distance travelers had been paying became single fares, taking millions out of the TTC’s budget, more than doubling its deficit and saddling the taxpayer, who had to make up the difference. At the same time, suburbanites who had been commuting by car, often accommodating the schedules of those giving them lifts, suddenly found the subway more convenient. Suddenly, shoppers who had been patronizing their local merchants abandoned them for more fashionable, downtown stores. In the one year that the two-fare system was abandoned, the TTC carried an astounding 40 million more passengers — riders who, for the most part, weren’t paying their way.

In 1960, seven years after Toronto joined its suburbs to form a metropolitan city government, every one of Toronto’s transit routes still made money; 22 suburban routes lost money. By the early 1970s, every suburban transit commuter received a subsidy of $75 a year from the generally less-well-off transit riders who resided in the city.

The more suburban services were extended, the more money the TTC lost, the more the TTC cut back on service to urban customers, the more all customers were charged. The result was ruin for all. By last year, of the 150 routes in the TTC system, all but 13 were losing money.

It got worse, too. With the TTC becoming a financial basket case, it required subsidies from the provincial government, giving it an additional political master. Now the TTC would be required to buy buses and streetcars, and to build subways, to serve grand provincial social and economic policies: One such deal led to the purchase of 90 Hungarian-made bendable buses that are now being prematurely scrapped; another involves the forced purchase of low-floored streetcars — at three times the cost — from a failing company owned by the provincial government. A third fiasco involved the proposed construction of four subway lines to nowhere, multibillion-dollar losers fashioned for short-term job creation prior to a provincial election.

Even without building the subways (three of which have since been shelved), and with stacks of subsidies from various levels of government, the TTC is on the brink of financial collapse. In the past, the monopoly blissfully hiked fares to meet its spiraling costs without concern for its passengers. Then passengers went on strike. Compared with the late 1980s, the TTC now takes 75 million fewer riders per year. New fare increases will probably be futile; more passengers will quit the system, costing the TTC more than it gained. Cutting back on service would also backfire. As vehicles deteriorated, increased disruptions to service would persuade passengers to turn elsewhere. Staff cuts might loom to reduce expenses, but these could trigger another strike, persuading more passengers to turn to the automobile. Run-down and hobbled by politicians, the last great transit system in North America is collapsing.

While the auto industry is innovating, innovating, innovating, the TTC and every other public transit system on the continent is mired in politics, stagnating. Frozen in a Soviet-style industrial paralysis, subways don’t change, buses don’t change, just as East Germany’s automobile, the Trabant, didn’t change in the 26 years before the Berlin Wall fell. While in any major North American city people can choose between dozens of different driving experiences, just about their only choice is Ford-black when it comes to mass transit. Most transit companies offer one class of service — about the luckiest passengers can get is a choice between local and express service, or in some cities, between riding a derelict vehicle below ground as well as above.

It needn’t be so. It won’t be for long.

Margaret Thatcher’s unexpected revolution

The revolution on the road and in rail is coming from the United Kingdom, whose ideologically driven leader, Margaret Thatcher, declared soon after assuming office in 1979 that nothing must obstruct the advance of “the great car economy.”

With contempt for the massive subsidies supporting public transit systems in Europe and North America, and disdaining the deteriorating systems in the U.K., Thatcher set about destroying public ownership of U.K. transit systems, beginning with all systems outside London, by squeezing their subsidies and promoting their privatization. She only partly succeeded: Government subsidies remain, although they have been more than halved. Municipalities are free to subsidize routes they consider “socially necessary” and to own bus companies, and many do. Sixteen years on, her revolution hasn’t quite made it into high gear, but dismay by public-transit boosters runs deep nevertheless. With the loss of subsidies, fares quickly rose 13 per cent for the country as a whole, and by 50 per cent in metropolitan areas, where local governments had cut them in the run-up to privatization. The rapid decline of market share prior to deregulation continued at the same rate following deregulation: Local bus ridership is down 25 per cent since 1986, the year deregulation began.

In the process, public transit in the U.K. has been saved. The statistics, discouraging at first glance, obscure a return to normalcy and to solvency, and point to a renaissance in public transit. The U.K. U-turn is so startling, in fact, that it becomes clear that the private automobile is vastly overused in many areas, and that without the decades of government derailments that destroyed public transit’s vitality, public transit would be a going concern. Complete Thatcher’s “car revolution” and the automobile’s market share in large cities stalls, then shifts into reverse.

Here is what’s been happening in the U.K. Thanks to deregulation and privatization, unprofitable routes serving areas ill-suited for public transit — the cause of the decline of the TTC today and of North America’s great public transit systems early this century — are being scaled back to profitability or dropped, removing a burden that has crippled public transit’s ability to compete with the car. The removal of these environmentally mad, money-losing drags on the industry — and many still remain, particularly in London — accounts for the entire loss of ridership. Overall, there is much less pollution, and taxes have been diverted for more beneficial purposes.

Now take a level-headed look at the statistics. Facing competition, transit companies have cut the cost of running a bus by 41 per cent. Eighty-four per cent of buses outside London are now run on a for-profit basis. And on these routes, the companies have started to care for their customers, competing in myriad ways. Some charge higher fares to ride in shiny new buses, others aim for the budget market by running cheap, second-hand buses. They’re publishing timetables that trim minutes off their rivals’, they’re painting their buses distinctive colors to attract attention.

But mostly they’re reducing waiting times for passengers. More buses run more often, leading to a 24 per cent boost in mileage logged; on very busy routes — the backbone of transit operations — passengers know they’ll never wait more than a few minutes.

Public transit is making a comeback in the U.K. The once relentless decline in ridership and service has been spectacularly reversed in areas for which it’s suited. And competition on the road shows no sign of ending, with more and more entrants in a once-again mushrooming industry: Last year alone, the U.K. government received some 20,000 local bus service registration applications.

The biggest innovation involves bus types: Instead of limiting themselves to large, cumbersome buses, transit companies now consider a burgeoning choice of vehicles, some large, some small, some luxurious, some utilitarian. In many areas, transit companies are running minibuses, often at two or three times the frequency of bigger buses. Another innovation, “hail and ride,” was introduced on some routes, eliminating long walks for many customers situated between long stops. When it was dulled by monopolization, the transit industry believed “hail and ride” would slow schedules. It didn’t, partly because buses no longer need to wait for anxious passengers running to catch the vehicle before it departs. And routes changed dramatically to suit the traveling patterns of passengers, rather than the tidy maps of old-style route-planners. Minibuses now venture into low-income ghettoes (called “estates”) to pick up passengers who before had to walk out to the main road. The corporate culture has changed too. New bus drivers are recruited, partly for their ability to get along with people, while surly ones are shown the door.

With passengers being courted in different ways, ridership along minibus routes soared by as much as 73 per cent. In some communities, people increased their use of public transit not just for work or school, but for shopping, running errands, or visiting friends and relatives too. In other communities, the increase was mostly for the optional activities. Defying the dogma of transportation planners, who believe automobile use must rise inexorably, it actually declined.

The minibus’s success demonstrates the need for decentralized, competitive public transit systems that are free to innovate in order to capture new customers and keep old ones. Instead of treating passengers as an undifferentiated lot, as do North America’s public transit systems, in the U.K. different services are proliferating — there are niche markets even among the minibuses: The dozen different types range from 20-seat Ford Transits and Freight Rover Sherpas to 24-seat Mercedes to 25-seat Renault vans and 33-seat Mercedes. Higher-density routes now use “midibuses” as well as conventional large buses (and double-deckers in very high-density routes).

This is the case in London, where the national government prescribed decentralization with a dose of privatization, and where the benefits, though they’ve come more slowly, have nevertheless been robust. Buses now log 20 per cent more miles, largely due to the 1,000 midibuses on London’s roads that replaced the less frequent, larger vehicles. Here, too, competition is teaching companies how to care for their customers. One bus company running midibuses, Gold Arrow, advertises that “Route 28 will run every 10 minutes all day, every day, with many extra buses at busy times.” It also provides “many special features designed to make travelling more comfortable, including low steps, high visibility handrails, and plenty of space for pushchairs [children’s strollers] and shopping trolleys.” London General calls its Route 11 service “probably the best value sightseeing trip in London.” Midibuses have opened up new routes in London’s suburbs, many roads receiving bus service for the first time.

Bus deregulation in London took the form of breaking up the city’s giant bus monopoly into 10 subsidiaries (until last year, they remained in government hands) and allowing private bus operators to bid for some routes (in the rest of the country, competing bus companies determine their own routes and can run head-to-head with each other on the same streets). These tendered routes, which introduced a measure of competition, outperformed the non-tendered routes, providing more reliable service and attracting up to one-third more passengers. The subsidiaries cut operating costs to compete with the private buses and, prior to their privatization, met 85 per cent of their expenses from the fare box.

“There is no doubt that London Transport was paying far more than it needed to for the service it was providing before we had the tendering process,” states Stephen Glaister of the London School of Economics and a former member of the board of London Regional Transport. After accounting for inflation, the cost of running a bus in London fell by 40 per cent. Tendering revealed that publicly owned buses were hurting public transit by hobbling its ability to compete: Now that they’ve been sold, in half the cases to their own management or staff, the costs savings and service improvements, if anything, should pick up speed. Bus users now wait an average 6.6 minutes for their bus, less in rush hour, where the average is dropping to 1.5 minutes along busy commuter routes. And after decades of decline, London’s bus passengers have started to come back: Since 1991, bus use has climbed. Is the bus business in the U.K. viable? Investors think so. The 10 London subsidiaries were snapped up for £233 million, twice their predicted value.

Profitability seeps into the Underground

Miraculously, the other half of the London public transit system — the Underground — is also becoming viable. In contrast to the steep decline that the Underground experienced prior to the 1980s — between 1972 and 1982, for example, passengers took the tube for 25 per cent fewer miles — in the decade that followed, largely due to innovations in the run-up to transit deregulation, passenger miles almost doubled as those running the tube slowly started caring about what their customers thought.

In its official handbook, in a remarkable statement that must have shaken the company’s proud bureaucracy to the core, the London Underground admits to a history of staggering corporate complacency: “By the 1990s much of the Underground’s culture had stagnated for many decades: for example, the conditions of service governing most front line staff had been unchanged since 1922. In response London Underground evolved its Company Plan, launched in November 1991, to improve safety, quality and efficiency. . . .The whole thrust of the changes was to focus all staff on meeting customer needs.”

What other subway system in the world follows a Customer Charter that refunds your fare if its error has delayed your journey by 15 minutes or more? Or posts reports at stations showing waiting passengers how well, or poorly, it’s doing at meeting its targets for punctuality?

Deregulation and the prospect of privatization forces the Underground to be responsive to its customers’ concerns, even in areas such as crime prevention, where, by all objective measures, it has been doing well. The public wanted it to do better and it has: Crime in the tube has dropped for the sixth consecutive year, thanks to more security staff, more visible staff, and intercoms enabling passengers to talk to the drivers.

The bottom line? London’s public transit system is providing more service than at any time in the last 25 years. Passengers are coming back, and they’re paying more for the additional service they’re getting. Revenue per passenger-mile is up for both buses and subways. While buses still lose money subsidizing unprofitable routes, the subway is showing an operating profit exceeding £100 million, compared with a loss of that amount five years earlier. London’s public transit system as a whole is costing taxpayers less, generating internal profits more, and looking forward to the day its surplus can finance its expansions too. Car use? Why, in London it has been falling since 1990, losing market share to public transit.

In the public transit industry, profitability hasn’t been part of the vocabulary. Even when a North American transit company speaks of “privatization,” it merely refers to contracting out routes to more efficient operators who would cut the losses, and it’s happy to leave it at that. Although 37 per cent of U.S. transit services are privatized, none have competition, and transit continues to go nowhere.

To public transit’s sorrow, the public transit debate has not been about the merits of a highly competitive system versus a monopolized one, but over how best to spend staggering transportation subsidies. Since the 1960s, public transit has had its share, but those days are coming to an end. Even social policy reformers now argue to abandon public transit in favor of more efficient automobiles. Atlantic Monthly, in prominent articles earlier this year, argued that the hundreds of billions in monies misdirected to subways and other railed vehicles should be directed instead to high-tech schemes for the car — more efficient cars, smaller “subcars,” even buses for cars. To make the world safer for cars, vehicle designer Andrew Frank of the University of California at Davis, the star of one Atlantic Monthly piece, advocates customized tractor-trailer frames that would carry up to 20,000 cars and subcars per hour per lane on the typical Los Angeles freeway, as compared with the current maximum of 2,000 cars. “Frank’s ‘car-bus’ would operate like a freeway ferry, carrying vehicles, their drivers, and passengers. More elaborate versions for long hauls — from L.A. to San Francisco, for example — would be equipped with climate control and other amenities. Drivers would reserve space ahead of time and then proceed to loading stations built beside or within existing interchanges. Fully automated, the stations would funnel cars into a series of bays perpendicular to the oncoming trailer. Once the ferry arrived, an entire line would be shunted onto it in ten seconds.”

Continue to part 3