August 2012

Private public transportation operators get another look

by Frank Di Giacomo, Publisher

Partly as a result of the deep fiscal crisis that local transit agencies have faced since the Great Recession, many are studying whether to involve private operators in transit more. The fact that new APTA CEO Michael Melaniphy has agreed to be the keynote speaker at BusCon is another indicator of the increasing interest. However, outsourcing service is not a panacea and should be looked at situation by situation. That’s why some recently proposed policy changes could create unnecessary burdens, or at best, are solutions in search of a problem.

Back to the future – not
It’s important to remember that no one is really talking about returning completely to the days when all of transit was operated by private companies. There was a reason why state and local governments, and eventually the federal government, became involved in public transportation: these operators could not sustain a profit over the long run. Government got involved because there was an interest beyond a financial calculation. That interest still exists, of course.

Instead, some governments are looking to involve private operators through contracting for service. These approaches vary from city to city, and so do the reasons. The most common use of contractors is for demand response or paratransit service, mostly to cope with high costs of these services. However, in some cities, the whole regular-route bus network has been contracted to private providers; others have a combination of contracted and directly operated service. For rail operations, commuter rail service is frequently contracted out, but Phoenix also contracts out its new light rail service as well. Denver is also looking at a public-private partnership that will design, build, operate and even partly finance several new commuter rail lines. The industry is closely watching that experience to see if it can be done elsewhere.

No one size fits all cases
The above should show everyone that each situation is different. Unfortunately, several in Congress wanted either to restrict the use of private solutions or mandate greater use of them. Neither should be adopted. Rather, Congress should make it easier to use private contractors, consortia or financing so that agencies can better develop the best strategies that work for them.

We also need to recognize that in some cases private companies can take on more risk, but in other cases they cannot. In addition, with added risk should also come greater potential reward, which usually means allowing more profit in these cases.

Private companies, themselves, will repeatedly say that none of these options mean public agencies get out entirely. In fact, they will say the opposite: governments will always be in charge. The real question is how involving private participation can help achieve government’s mission.


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