Passenger Trains > Privatize the DC Metro?

Privatize the DC Metro?
Foundation for Economic Education
by Chris Edwards
January 19, 2017

> Some members of Congress are considering restructuring DC Metro’s
> management and oversight. Big reforms are needed given the disastrous
> service, safety, and financial performance of the system in recent
> years.
>
> Why not privatize Metro? Countries around the world have been
> privatizing their transportation infrastructure in order to improve
> management and efficiency. Privatizing Metro buses would be
> straightforward, but even privatizing the subway system would not be
> an unheard of reform.
>
> Hong Kong privatized its subway system in 2000. In a recent study on
> infrastructure, McKinsey reported:
>
> Hong Kong’s MTR Corporation has defied the odds and delivered
> significant financial and social benefits: excellent transit, new and
> vibrant neighborhoods, opportunities for real-estate developers and
> small businesses, and the conservation of open space. The whole
> system operates on a self-sustaining basis, without the need for
> direct taxpayer subsidies.
>
> MTR’s railway system covers 221 kilometers and is used by more than
> five million people each weekday. It not only performs well—trains
> run on schedule 99.9 percent of the time—but actually makes a profit:
> $1.5 billion in 2014. MTR fares are also relatively low compared with
> those of metro systems in other developed cities. The average fare
> for an MTR trip in 2014 was less than $1.00, well under base fares in
> Tokyo (about $1.50), New York ($2.75), and Stockholm (about $4.00)."
>
> That sounds pretty darn good.
>
> The average fare on the DC Metro is about $3. The on-time record of
> Metro is unclear, but in technical terms I think “crappy” best
> describes it. Note that Hong Kong’s 99.9 percent on-time record means
> that “of the average 5.2 million passenger trips made on the MTR
> heavy rail and light rail networks on each normal weekday, 5.195
> million passengers safely reach their destinations within 5 minutes
> of their scheduled arrival times.” In 2014, “the system ran for 120
> consecutive days without a single delay over eight minutes.” Wow.
>
> That stellar performance induces strong demand for the Hong Kong
> system, which in turn generates high fare revenues. The ratio of
> passenger fares to operating costs is a high 185 percent, which means
> that fares fully cover operating costs and part of capital costs. MTR
> raises other funds for capital from real estate deals under which it
> gains from land value increases near stations. The Hong Kong system
> is profitable and unsubsidized. By contrast, the average ratio of
> fares to operating costs for U.S. subway systems is just 46 percent,
> and the systems are heavily subsidized.
>
> The MTR is probably the best-run subway system in the world. The
> system is an “immaculately clean, well-signposted, cheap, regular,
> convenient system.” And there’s free Wi-Fi in most stations.
>
> The system is so admired that MTR has been contracted to run systems
> in other cities. CNN says: “MTR Corporation now operates the London
> Overground, and two lines of the Beijing Metro, as well as parts of
> the Shenzhen and Hangzhou Metro systems in China, the Melbourne Metro
> in Australia and the Stockholm Metro in Sweden … London Overground
> enhanced its punctuality from 88.4% in 2007 to 96.7% in 2013 after
> MTR took over its operation for a year.”
>
> Can we get MTR Corporation to expand into Washington? Metro Board
> Chairman Jack Evans wants a federal takeover of Metro, but how about
> a private takeover?

https://fee.org/articles/privatize-the-dc-metro/


My guess is that MTR, realizing the myriad difficulties at
Metro, from political string-pulling to the "Entitlement Mentality"
of District residents, would IMpolitely decline. -GP



Edited 1 time(s). Last edit at 01/19/17 23:24 by GenePoon.

Your guess is probably correct.  It's funny -- virtually all of the US's transit systems that were privately held corporations, went to public agencies, starting in the 1960's.  Are we going to see a reversal in the next few years?

One big difference between MTR and the DC Metro: MTR (which I've ridden occasionally for 20 years) was in good physical condition at the time of the spinout. DC Metro, on the other hand, is a physical shambles. It will take billions to fix. Where does that money come from, and under what terms? A for-profit operator would have to pay high interest rates to find money in the private capital market. I just can't see that happening. At a minimum the governments involved will have to arrange financing. In other words, privatization is a gray scale not a black-and-white thing. 



Edited 1 time(s). Last edit at 01/19/17 19:53 by ctillnc.

Conrail was set up in the same way. The PennCentral was in shambles.  Reading and Erie-Lackawanna were in better shape, but not excellent, etc.

Tens of thousands of employees were laid off (feds picked up the tab), thousands of track miles were sold off or abandoned, and enormous investment in track and equipment was made, courtesy of Uncle Sugar.

When the renewal was beginning to make sense and show results, the first attempt to sell Conrail was made. Buying assets on the cheap...

There is one BIG flaw in the "Hong Kong privatized their system" argument. Everything in China is managed and controlled by the central government through finances. The "free market" as we know it DOES NOT EXIST IN CHINA. On the surface it may appear to be free and open, but if you peek under the covers you will see another story altogether.

You can't apply that model to Washington Metro.

I do business in China. "Free market" is a gray scale. The U.S. is not an absolutely free market, either. On a scale of 1-10 where 1 is absolutely free and 10 is absolutely state-controlled (like the Soviet Union), I'd put the U.S. at 2.5, Hong Kong (which is a "special administrative region") at 4.5, and mainland China at a 7.5. 

The dynamics of the District are changing rapidly. The old time race baiting of Marion Barry is gone The casual corruption of the Vincent Gray era is in the rear view mirror.

I suspect we're about to see the diverse population wanting assurance their bus or train is on time, and won't kill them. And won't have tolerance for the old ways.

Posted from Android

More relevant to the discussion is this thread from 5 years ago, regarding the former NYMTA (New York Metropolitan Transportation Authority) chariman Jay Walder:

http://www.trainorders.com/discussion/read.php?4,2521539

If people are wondering what happened to Mr. Walder, his contract (as CEO of MTR Corporation in Hong Kong) was not renewed after 3 years at the helm. He's now CEO of Motivate, a bike sharing company (in a nutshell). Still transportation-related, but an interesting career change, to say the least.

Jay Walder would be a qualified person to comment on a possible privatization of the DC Metro, in my opinion.

Hope people commenting on Hong Kong vs. China have actually visited, instead of ranting based on some patriotic propaganda. I know people who were ready to leave (or actually left) Hong Kong in 1997 when the British handed the territory over to China... but many went back because the business climate (capitalism) didn't change that much after the handover. Yes, there have been social/political changes, but Hong Kong's transit systems continue to run, and that's NOT off topic.