Privatize for the Public Good

The Problem There is no denying that in the city of Boston is atrocious; massive congestion on the roads, trains derailing on the track and constantly breaking down. However the most critical issue is the city’s carbon footprint. With fundamental changes to our transport system we can ensure that Bostonians have a safe, fast and environmentally friendly ride to work.

Automobiles in Boston

State of Cars Bostonians use cars to to work more than any other mode of transport. Between people driving alone and carpooling it accounts for 46.7% of commutes.(Boston, 2015) This reliance on automobiles has massive drawbacks. The first of which is safety. There is an average of twelve accidents per day among people commuting to and from Boston, leading to 10 fatalities per year. (Boston Globe, 2019) To build a better transport system safety of commuters should be at the forefront of the changes. Along with safety, the pollution emitted is disproportionally high compared to the mass transit system. The 46.7% of people that commute using cars emit 87% of the greenhouse gasses. (ISE, 2019) This is where there is the greatest opportunity to cut the city’s carbon footprint. Predominantly through expansion of electric vehicles. The current movement towards EV is small but promising, in 2018 they only accounted for 2.5% of the cars in Massachusetts. While this seems low their share of the market has been increasing at ~90% per year.(EvAdoption, 2020) As EV technology and Boston’s electric charging infrastructure become more advanced this shift will only become more profound.

The MBTA The MBTA accounts for 1.18 million trips on a weekday between its 4 services. (MBTA, 2020) The current MBTA budget sits at 2.12 billion dollars with 1.06 billion coming from the dedicated sales tax subsidy. (MBTA, 2020) This state subsidy is where the most opportunity for change exists. Across all of its services the MBTA hits a farebox recovery ratio of only 42.6%. (What percentage of cost is paid for by ) Compared to other cities the MBTA financials are appalling. A report by the Pioneer Institute showed that between 1991 and 2013 the MBTA received $2,356 in per capita capital funding, 68.9% higher than 5 other comparable transit authorities* average of $1,395 in per capita funding. This discrepancy exists also in total funds per capita, with the MBTA at $8,137 compared to the average of $4,770. (Pioneer Institute, 2015) These troubling financials are preventing any meaningful innovation from taking place.

*The 5 transit authorities include: Maryland Transit Authority, Southeast Pennsylvania Transit Authority, Washington Metropolitan area transit authority, Los Angeles County Metropolitan Transit Authority and Chicago Transit Authority.

Per Capita Capita Funding Total Per Capita Funding (Pioneer Institute, 2015)

The T and Of the 1.18 million weekday passengers the T and Commuter Rail account for 54% and 10% of the ridership. (MBTA, 2020) In terms of safety the MBTA has the second most derailments among transit authorities in the United States with 43 between 2014 and 2018. This has been on a constant rise over the past 15 years. (FTA, 2019) Along with the lack of safety the cost of fares has been steadily rising faster than inflation. The graph below shows the fares from 2000 to 2020 compared to the consumer price index over the same time period.

(MBTA, 2020) (Federal Reserve, 2020)

A Boston globe report showed that the T would need a 10 billion dollar investment to modernize. This sparked the current 8 billion dollar capital investment plan currently being carried out. A redeeming aspect of the T and commuter rail is that it accounts for 750,000 rides and contributes less than 5% of the GHG emissions. (ISE, 2019) All of these issues show in the customer ratings of the T which throughout the year varies from 2.5 to three stars. (MBTA, 2020)

Buses The MBTA services account for 411,000 trips on an average weekday. 35% of the MBTA’s total service. (MBTA, 2020)Just like the T and commuter rail the financial state of the service is reprehensible. The intrinsic way that the bus routes in Boston are operated has led to a far greater cost compared to other cities and other transport authorities in Massachusetts. In terms of the environment the bus services of the MBTA and other private companies account for 8% of total pollution. (ISE, 2020)This is far better than cars but with a zero emission goal it is not good enough.

Per Mile Costs Comparisons The MBTA spends far more on bus routes than the national average as well as more than all other transit authorities in Massachusetts. The MBTA spends $16.63 per revenue mile while the other 12 regional transit authorities in Massachusetts spend an average of $6.22 per revenue mile. (Pioneer Institute, 2018)

(Pioneer Institute, 2018)

These RTAs obviously do not service a city like Boston so how does the MBTA compare to other cities in terms of cost. Five peer cities with similar bus service spend an average of $12.19 per revenue mile.

(Pioneer Institute, 2018)

Maintenance Much of the inflated costs of busing comes from the enormous cost of maintenance. Compared to five other cities with comparable bus services the MBTA spends on average 92.2% more.

(Pioneer Institute, 2018)

However Boston obviously has a harsher weather than Miami and Atlanta so comparing the cost to similar climates is also important. Taking 6 cities that get more snow than Boston the MBTA still spends 63.8% more on maintenance.

(Pioneer Institute, 2018)

Lastly the age of the buses is important to look at as well when examining maintenance cost. Compared to the other snow heavy cities the MBTA buses are a mere 2 week younger on average. Hardly a reason for the inflated costs.

(Pioneer Institute, 2018)

The cause of this massive price tag is the amount of hours worked by maintenance employees. Compared to five similar transit authorities the MBTA had on average 65.7% more work hours per revenue mile.

(Pioneer Institute, 2018) Along with the more hours worked the MBTA also has the most full time employees per revenue mile and the highest wage earned by maintenance workers.

“The Ride” and Both of these MBTA services account for less than 1% of total MBTA ridership which is why they are neglected within this report. (MBTA, 2020)

The Pacheco Law This law enacted in 1993 has had the effect of preventing a large amount of privatization within the government bureaucracy and especially the MBTA. Between 1998 and 2015 the Pioneer Institute found that this law had cost the MBTA upwards of 486 million dollars. It is the most restrictive privatization law in the country, which prevents competition to lower the costs of public services. This is the difference between Boston and the other cities it has been compared to. The bus routes and the maintenance of the buses has to be directly served by the MBTA. This leads to inefficient workers in garages and the use of high cost directly serviced bus routes.

(Pioneer Institute, 2018)

The graph below shows the drop off in purchased miles by the MBTA from 1997-2013.

(Pioneer Institute, 2018)

Suspension of the Pacheco Law In 2015 Governor Baker and the legislature voted to suspend this law for five years. The effects of the suspension were immense. Through this suspension the MBTA was able to outsource many of its inefficiently run internal processes; including administration of overtime, customer service, warehouse, monetary operations and logistic work. (Pioneer Institute, 2018) They estimated at the time it would save $450 million dollars over a ten year period. These are the savings needed to set the city up to invest in carbon neutral infrastructure.

​The Solution The most important to take is restructuring of the MBTA service to give the state and city financial flexibility to invest in new innovations. The current structure prevents any meaningful change from happening. Privatizing the MBTA is the only way to ensure its long term financial health and allow it to keep innovating to better serve the people of Boston. The first step to achieve this is to repeal the Pacheco law.

Privatized Rail No city in the United States has a privatized metro system to compare to. Hong Kong and Tokyo provide models that Boston can take inspiration from in reaching financial stability.

Tokyo At first glance the Tokyo subway map could be confused with a diagram of neural pathways, it makes the Boston T look as complex as a 4-way intersection. In 1987 the was organized into 6 private rail companies. With an astonishing 5 of these companies operating at a profit today. (Calimente, 2012) On average this has allowed a farebox recovery ratio of 119%. (Calimente, 2012)The main reason for this is innovation such as, faster turnaround at platforms, more advanced signaling and better maintained tracks. All of these efficiencies make the riders experience better, which incentivizes more citizens to use the rail network. This profitability and increased efficiencies have come with far more stable prices than seen in Boston. Adjusted for inflation the Japanese fares have stayed relatively the same while in Boston have hiked over and over again. (Calimente, 2012) To ensure that the prices stay stable the Tokyo government regulates any increases proposed by the rail companies.

Hong Kong The MTR in Hong Kong is the most profitable metro system in the world. The MTR’s farebox recovery ratio is a staggering 186%.(PolyMatter, 2019) To privatize, in the year 2000 the MTR was listed on the Hong Kong stock exchange where 24% of the company was sold to the private sector. (Centre for Asian Business cases, 2001) The government used privatization to fund medium term investment to ensure its competitiveness with other modes of transport in the city. The fares for the MTR much like Tokyo have followed closely to the country’s inflation rate unlike the MBTA. Since the MTR is so profitable it pays a dividend back to the city’s government, this would be unheard of in the United States.

Farebox Ratio Examples 42.6% 119% MBTA (BOSTON) ​ Tokyo Metro ​

70% 186% BART (San Francisco) MTR (Hong Kong) ​ ​

San Francisco’s BART has the highest farebox recovery ratio of any city in the United States. (Polymatter, 2019)

What Would Privatized Rail in Boston Look Like? Acknowledging reality and keeping the political leanings of Boston and Massachusetts as a whole, the most likely model of privatization to have public support is one comparable to Hong Kong’s MTR. Keeping the majority under public ownership while allowing private investment, competition and operation to exist.

Exclusively Purchasing Bus Routes and Maintenance To save billions of dollars over the next 30 years the MBTA should phase out their directly serviced bus routes. All 4.5 million miles of bus routes should be purchased from 3rd party companies so competition on price can exist and the residents of Boston can have the cheapest most effective bus system possible. Along with this, taking the maintenance of the buses off the MBTA’s balance sheet frees up more money for carbon neutral investment.

How Much Money While it's hard to know exactly how much money will be saved from these changes it is certain to be a substantial amount. The goal should be to reach the same farebox recovery ratio as San Francisco at 70%. Using the 2020 budget and revenue numbers the MBTA would save 624.67 million dollars a year. Over the next 30 years that would equate 18.75 billion dollars.

Regulations and Investments All of this restructuring needs regulation to ensure the goal of a carbon neutral is attained. Between cars, trains and buses there needs to be strict parameters on what the city will allow as these fundamental changes are made. With the support of state money saved from restructuring the MBTA necessary investments can be made between the Buses, automobiles and trains.

Automobiles The reality of America is that we have a deep rooted car culture. However major manufacturers are committed to creating a carbon neutral future for the automotive industry. Makers like General Motors have plans to be completely electric by 2040. With that leadership the switch to EV cars will happen. However measures can be taken to speed up the process. First of all a progressive congestion charge, tied to the MPG of the car. These have shown in other cities to encourage the use of public transport as well as environmentally friendly cars. With an average charge of five dollars on cars that travel through the tunnel system the city would generate 700 million dollars in revenue annually. These funds would go towards increasing the electric car tax rebate from $2,500 to $5,000. However luxury electric cars will not receive a rebate. If someone is purchasing a $125,000 Tesla they have the means to easily and should receive a rebate. The goal of this is to incentivize the middle class purchasing reasonably priced cars to pick an EV over gas. Along with the congestion charge investing money in electric charging infrastructure. This would further incentivise people to make the switch to EV. In terms of safety the goal GM laid out should be adopted where there are no crashes. As these cars become more and more advanced they will become safer and accident numbers will fall without government involvement

Buses From research it's apparent that electric buses are not quite ready to fulfill all the needs of a city in a cost effective manner. However there can be no doubt by 2050 that technology will exist. That being said with the plan to purchase bus miles strict emission standards must be adopted as well. The idea of this is to have a gradual transition away from gas as technology gets more advanced and the Boston EV infrastructure becomes more sophisticated. Mandating an average emission standard over a fleet of buses that become more and more restrictive over the next thirty years will allow companies to adopt electric buses at a reasonable and fiscally responsible rate. As previously discussed the saved sales tax money will fund electric vehicle charging infrastructure which will support the bus fleets as well.

Trains While trains are the most environmentally friendly mode of transport in Boston zero means zero in terms of carbon emissions. In keeping with the gradual nature of this proposal over the next 30 years the T will be required to source all of its electricity from renewable sources. With the same structure as the buses, an average across the entire system with ever restricting regulations. Along with this the privately owned MBTA would be eligible for expansion grants tied to their farebox recovery ratio. This would mean that as they became more fiscally responsible they would receive more state investment to expand their reach. The money they would receive in grants would be the same exact money they would save from restructuring their operations, it would be incentivized to be spent on expansion rather than operational costs.

Conclusion As a city we can do better than the transport system that we have now. We can have a carbon neutral and fiscally responsible system if we commit to major changes. At the heart of these changes is the restructuring of the MBTA. This would save billions of dollars over the next 30 years. This saved money would be spent on grants for the T and commuter rail as well as expanding the EV infrastructure in Boston. All of this can be done without having the taxpayers foot a massive bill. Regulations would also be enacted to slowly phase out gas powered buses and non renewable areas of the T. A congestion charge on gas powered vehicles should also be implemented funding an increase in the tax rebate for new electric car purchases. All of these changes together will ensure that by the year 2050 Boston is carbon neutral and at the forefront of the environmental revolution.

Bibliography

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