MARTA Profits Around the Corner? Maybe Transit does have Pricing Power Options?

Sometimes a system is in place that turns an operational profit based on "subsidized" pricing models.  For Tri-met there are bus lines that sometimes turn an operational profit, sometimes, during rush hour especially, the MAX turns an operational profit.  Recently MARTA, the Atlanta are transit authority, turned an operational profit.  This has been happening time and time again around the country since gas prices are increasing and reflecting the true cost of utilization and an attitude of transit usage is growing in popularity.  Slowly but surely our nation is changing its ways, again.

Therein lies some serious logic about deregulation, privatization, and an equalizer put in place for all modes of transport for infrastructure, or the logical removal of interference in the construction of and maintenance of infrastructure.

Let's work through this for a moment.  A line or art of a system turns a profit on operations based on subsidized pricing models.  The system or line is in competition, in a manipulated transportation market, with automobiles and sometimes other private systems such as taxis or even busses.  The other systems generally receive a massive subsidy to maintain and or build roadways, thus unbalancing the system.  If the unbalancing was removed, and a private system put in place that had to actually cover, either through tolls or fares of some type, the pricing models would need to be totally different.  Based on these different models, the price increase of roadways for auto users and the price increase for transit users would be anywhere from 20-80%.  Most likely higher for auto users.  If we look at what the theoretical prices would be for actually covering the costs of transportation two logical conclusions could be derived.

  1. Overall transportation use for whimsical trips and transportation for lifestyles that require longer distances and thus heavier reliance on fuels and energy would decrease, safe estimates would put it at between 10-50%.
  2. The systems, auto, transit, and other would pay for themselves in the vast majority of situations.  They did in our past and vast price reductions where enabled.  Only when prices had hit bottom did interference from the Government increase the societal global cost of transportation, while decreasing it for a group of peoples in the country.  This unbalancing has caused vast imbalances and instabilities in private provision of transportation services and required Government, sometimes forcefully, to take over the remaining transit and roadway systems in the country.  Often putting companies, trusts, and other entities setup to maintain, protect, and expand these services completely out of business or destroying them by means of outright legal elimination.

So why in the US, with these obvious correlations, do we still subsidize on such a huge level our entire transportation infrastructure and system.  The only functional results are an overall increase of actual costs (while it doesn't appear out of pocket because it is out of taxes) while it almost entirely eliminates our national companies that would build, maintain, or expand our vehicles, transportation infrastructure, and other tools.

I understand that there is a "possibility" of some people not being able to travel as often from say Los Angeles to San Francisco, or Miami.  I understand that initially during deregulation and removal of subsidizations that a natural market realigning would need to occur.  But this would solve so many problems.  Independent companies and entrepreneurs working in transportation again, capitol investments in transportation from the private sector again, transportation choices that aren't forced on users' and non-users' income taxes and other public funding sources.

Just to attach some associations to local projects, if the aerial tram can't be covered by users and the vested private interests (OHSU) it should not have been built.  If the interstate I-5 bridge can't be covered by tolls or by the primary constituents (Vantuckians of Vancouver Washington) then it shouldn't be built.  If the bridge to nowhere can't be funded by the 50 people on the island that would use it, then it shouldn't be built.  If the Acela line, under pressure from heavily funded highways can break operational costs and return an operational profit, it should be given the free-market to turn that into overall Acela system profits by being given a real pricing power by removing subsidy from both it and the highways.  If MARTA is turning operational profits it should also be given the pricing power to move that up to full coverage of the system.  If some parts aren't profitable based on fares then the local areas should vote, and those in support should cover the shortfall of costs.  Spreading the costs of these things throughout society causes a false increase of usage, causes heavier pollution to be brought into the world through excessive usage, and often causes removal of individual, community, and vested personal interest in the systems we use for transport; auto, air, rail, or whatever it may be.

If America ever expects to have an honest, strong, capable, and balanced system (at least vastly more blanced than today's system), Europe is not to be followed, our history provides example of what could be.  America has never been good at following.  America should lead, through the system we've given real birth to, and should lead with excess, individualism, and engagement of people instead of Government control of peoples through arbitrary authorities, mixed private public corporations, and other legally questionable entities.  We need to reinstate our trusts, our national businesses, and at core our individuals of entrepreneurial and intellectually capable motivation.

Here's to to hoping that we move in the right directions to make this happen, to expand our infrastructure and choices, to provide real stability instead of the faux stability of subsidized Government manipulations.  I wait with baited breath, exited and hopeful, for the future of the nation.

Published Thursday, August 30, 2007 10:11 AM by adron
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Comments

# re: MARTA Profits Around the Corner? Maybe Transit does have Pricing Power Options?

There's no evidence in this article that MARTA is turning an operational profit.  All it means is that they came in 12 million dollars better than expected on the budget.  

The cost of running the service is surely well more than 12 million above and beyond the farebox.  Go visit www.ntdprogram.com and look at MARTA's last entry and see what I mean.
Thursday, August 30, 2007 2:25 PM by TransitGuy

# re: MARTA Profits Around the Corner? Maybe Transit does have Pricing Power Options?

Quoted From Article:

"Authority has achieved an operating budget surplus for the second year in a row – recording $12.1 million in additional revenues for FY07"

In business circles, one would call that profit.  Surplus == Profit.  At least for this year.  Next year they'll probably be back to standard operating procedures and start bleeding red with needs for higher and higher appropriations for their respective budgets.  The authorities and such have no expectation of financial responsibility to market demand other than their political constituency.

Either way the functional means in which these transit authorities are supposed to operate is in a non-profit type way.  So if they're reaping "surpluses" then they're making more revenue than expected, from increased ridership.  It states that in the above quote.  If the service is of that value, it would be worth more if it was valuated based on actual worth to society, which passenger rail and transit service has NOT been since the mid-50's and one could accurately argue the mid to late 30's when all the road subsidies started to pile on faster and faster via the various works projects.  Those years it competed against a subsidized and over developing auto-industry, so thus even those market valuations where skewed.  If one truly wants to get an idea of true valuations for passenger service, take a look at the guilded age era, when the services generally covered their costs, and at worse definitely covered their operational costs with excess.  Between even the following years, ranging form 1880-1920 the systems where managed without Government intervention of any remotely significant means.  The same for transit agencies/trusts/companies.

Key System (San Francisco), Santa Fe, Great Northern, and other railroads operated their passenger services in the black.  NOT in the red like they are operated in today.  There is absolutely no reason for the vast inefficiency of today's services so they are not more cost effective, and could not compete in a true competitive environment with other "auto" or "jitney" type service.  The fact that transit has to be thrown such a huge subsidy "bone" is to alleviate the imbalance caused by excessive infrastructure subsidy in auto oriented travel.  After the 40s and WWII, there was no competitive chance for anything to compete in the way things where handled from the planners' end.  Even with that in mind many light rail system, streetcars, and other modes that are starting to spring up are the service, physical, and financial inferiors of their past private counterparts.

If you can prove that transit services are truly worthless to people based on real valuations, without subsidy, that's awesome - and I'd have to side with the likes of JK and other anti-transit advocates, but I believe people would find the services very valuable if accurately priced against competitors instead of the skewed pricing that exists.
Thursday, August 30, 2007 2:53 PM by Adron B. Hall

# re: MARTA Profits Around the Corner? Maybe Transit does have Pricing Power Options?

Visit this link.

http://www.ntdprogram.gov/ntdprogram/pubs/top_profiles/2005/agency_profiles/4022.pdf

Look at the portion of the page at the top near the center titled "Sources of Operating Funds Expended."

You will see:

Fare Revenue: (25%) $93 million
Local Funds: (58%) $215 million
Federal Assistance (11%) $40 million
Other Funds: (7%) $24 million

In the public sector, a surplus usually equals a lesser degree of subsidy.  Assuming you added the $12 million to this budget, the MARTA system would still be funded over 60% by local and federal public funds.  This is not a profit.  

At least you understand that automobility is massively subsidized.
Friday, August 31, 2007 9:46 AM by TransitGuy

# re: MARTA Profits Around the Corner? Maybe Transit does have Pricing Power Options?

I saw that.

I also know that based on that, one can derive the simple fact, that either A:  People don't value the service enough to even have it funded without the subversion of information by utilizing heavy subsidizations and B: It should be done away with just from a common sense stand point.

I also however know that subsidies are required to "balance" things when the Government is so significantly intertwined in something like this, and with road subsidies.

If transit infrastructure and auto road infrastructure costs where charged at time of usage via fares, tolls, or whatever pushed off onto the totally unrelated tax burden of the populace.  If it hit users at time of use, the notions I stated above would be absolutely valid.

For one, transit and auto usage would prove themselves of actual value to the populace based on their actual COSTS vs. the excessively subsidized, thus heavily over utilized transportation infrastructure.

But I digres, I understand where the subsidies are, I understand what minority part of the population pays for the bulk of the subsidies, and I find it absurd that the upper income earners are effectively paying, via taxation, to lower the costs for everyone else to abuse and over utilize system.  All while everyone gets screwed by the pollution of excess utilization.

We ALL should be bearing at time of use our costs to the system.
Friday, August 31, 2007 11:10 AM by Adron B. Hall

# re: MARTA Profits Around the Corner? Maybe Transit does have Pricing Power Options?

Well, if you wanted to pursue a balanced policy based on your beliefs, (which I'm pretty sure I don't agree with) then you really want to have an infrastructure usage fee based on a combination of:

-damage to the system
-impact to system functionality

Under such a system, everyone would pay an incremental cost on their impact to infrastructure.

Simply put, pedestrians and cyclists would pay the least.  Rail users would probably be next, followed by bus users, at least in urban settings.  Commuter rail may be a different story.

Following the transit groups you would have vanpoolers, then carpoolers.  Single occupant vehicle drivers would pay more than all of these groups, and drivers of heavier vehicles would pay more to use roads than drivers of lighter vehicles.  Truck freight would pay the most.  

All major roads would be priced at all times, and you would also need a way to charge for neighborhood street access, which might be bundled as exit/entry fees into certain areas.  

In closing, I don't find it absurd that upper income earners help subsidize the mobility of those who are less wealthy.  This is one hallmark of a progressive society.  

I DO find it absurd that those of us who deliberately use less resources by walking, biking, and taking transit rather than driving alone are usually punished for our conservation and reduction of congestion and infrastructure impact rather than rewarded for it.
Tuesday, September 04, 2007 6:33 AM by TransitGuy

# re: MARTA Profits Around the Corner? Maybe Transit does have Pricing Power Options?

I'm kind of confused, I'm suggesting an honest, integrity based system, indicative by charges to users of the system instead of those that don't impose upon the system or not imposing on other systems, but it seems you are, "pretty sure you don't agree with".

As for your proposal of "damage to the system" and "impacts to system functionality" I do think that persons that use the system should be charged appropriate charges at time of usage to maintain, operate, and in some circumstances, build such systems.  It was done in the past in the majority of circumstance and could be done again without impacting millions of people that choose not to, or do not use the system based on inaccessibility.

As for vanpoolers, carpoolers, and SOVs, with a large hit to tractor trailers, yes, ALL of these entities probably owe a ton on the road infrastructure.  Especially tractor trailer and heavy traffic.

As fro neighborhood streets, that should be held accountable at city and local levels.  Let them decide how they want to pay.  The interstate, highways, and other major roadways though should be imposed on prospective users and active users, as you laid out.

As for you progressive society remark.  I understand that the rich always need punished for one reason or another, when the punishments get out of hand throughout history very negative things have come into play.  The rich though, are very low on the waste scale unlike the poor and middle class, who are mobilized to create vast pollution (re: auto-based society) by a re-appropriation of wealth by the Government - i.e. tax the rich and give the poor mentality, which is an absolute fraud.

In your last comment I see we do find common ground, and is the basis of the above arguments.  I strongly believe, I don't care if one is rich, poor, middle class, or other, that they should be held accountable for what they use and what they do.

This boils down to every practical rule and law I can think of in this country.  Murder, road usage, food stuffs, etc.  If you commit it, or you need it, you must and should pay for it.
Tuesday, September 04, 2007 9:35 AM by Adron B. Hall

# re: MARTA Profits Around the Corner? Maybe Transit does have Pricing Power Options?

"This boils down to every practical rule and law I can think of in this country.  Murder, road usage, food stuffs, etc.  If you commit it, or you need it, you must and should pay for it."

This is your belief which I do not agree with, because the blank-slate world to which we could apply your ideological purity does not exist.  Your veneration of the rich assumes that someone like George W Bush and a kid born on skid row in LA came into the world with the same opportunities and resources.  Nothing could be further from the truth, and a just society acknowledges those differences.

If you would like to visit a society like the one you describe above, you might consider a visit to San Paulo, Brazil.  The extralegal economy is huge, there are a small segment of rich people who do not pay to take care of the vast underclass.  Which is why many of the rich live in barbed-wire compounds and commute to work by helicopter for fear of being overrun by angry starving mobs in the streets on the way to work.  

http://www.washingtonpost.com/ac2/wp-dyn/A42332-2002May31?language=printer

Undoubtedly, the rich you are concerned with have much lower tax burdens and levels of onerous to regulation to live with, if you call what they do "living."  

Broadly speaking, I believe we have some basic responsibilities to one another as human beings.  Most sophisticated, developed nations have realized this and provide every citizen with health care.  The USA does not.  This is where you and I are very far apart.  
Thursday, September 06, 2007 7:07 AM by TransitGuy

# re: MARTA Profits Around the Corner? Maybe Transit does have Pricing Power Options?

So a poor bloke shouldn't be responsible for murder, road usage, or food stuffs, but a rich guy should?  Where is the end to the hazy middle ground, mixed mode funding, mixed economic model, mediocrity is ok, let's just do good enough at?

I'm not even talking about health care.  The rich include people over, last I checked, somewhere above the 65k income bracket.  The top 1% are rich, but according to the feds and others, so are the top 10% of income earners.  I don't like that definition, but it is a fact.  It is a damnable punishment.  People earning over 65k get punished, point blank, for doing so.  They receive drastically less service, hand outs, and other things than those in lower income brackets.  Still though, they are hated, considered so fortunate, etc.  They're still trying to just get by, many pay day to pay day, some living in high levels of debt out of partial necessity.

Rich or poor, it's a BS delineation.  A person has to get to the top 1% before they get a break, but that is only because those people are able to spend large cash to do something about it and fight back.  Is it fair, no not really, but if that top 1% goes away so does the wealth of a nation.  Just check what happened after WWII.  The great depression, and other such times.  The money LEFT, the possibilities left, so did those people that make things happen.

On a mostly related note.

San Paulo, Brazil, does not have a great history like that of the US, thus there is no comparison to make.  The US has a vast history of privatized development drastically increasing the standard of living in the United States.  The private transportation system built up this country from nothing.  The private transportation system still helps the country keep costs very low and standards high.

The passenger rail in this country, just like the transit in this country, when left to its own and private, in the hands of cities or individuals, was vastly superior to what we have now.

I just want what history shows was a vastly superior system.  Why we move toward solutions that are inferior, less capable, with less throughput, that cost 2x or 5x or more likely 10x as much as their historical counterparts that had better service is amazing, but obvious in that people without historical reference and knowledge commonly are damned to repeat the same mistakes.

You don't have to agree with me, but you cannot however, change history.  You also cannot state that the private transit system of Portland, or New Orleans, or San Francisco, or LA, or Denver, or Seattle, or Tacoma was superior to what is available now.

You may not agree, but I'd still like to know your specific arguments for this mixed mode, mixed financial, and high cost transit and auto based transportation network we have in the United States.  I'd like to know your vantage point on how it should be financed.  I'd also like to know how these public, or public-private systems are superior or somehow a better alternative to what was available in the past or how they are superior to the vastly more efficient, better throughput, better service, and better frequency private entities such as Alaska Airlines, Virgin Rail or Virgin Air, and other such systems.

As for the medical care comment, I'm not even going to continue that discussion on this blog, it's off topic and as bad of an offshoot as my silly murder comment.  I'm just not sold on assigning people different amounts of societal responsibility based on the fact that some are haves and have nots.  Just because one decides, or is not productive, doesn't mean he/she should have a right to someone else's productivity.  Throughout history that has always decreased the overall motivation and general wealth of a society anyway - thus I'm not sold on the idea.  There "might" be some exceptions, but they lie far outside of the norm in statistical anomalies and outlying data points.

I'd love to continue this discussion of prospective transportation solutions, but you should e-mail me so we can increase our thoroughness in a better way:  adron at adronbhall dot com.
Thursday, September 06, 2007 11:53 AM by Adron B. Hall

# re: MARTA Profits Around the Corner? Maybe Transit does have Pricing Power Options?

Oh, and btw.  Don't write off that kid in LA.  A kid in LA with an IQ over 95 has more opportunity in life the Georgie Bushie, that LA kid just needs to make sure to apply his mind.  Just cuz Bush boy is president doesn't mean he's a competent, successful, or even able "rich guy".  I'm sure you could easily agree with that?
Thursday, September 06, 2007 11:58 AM by Adron B. Hall

# re: MARTA Profits Around the Corner? Maybe Transit does have Pricing Power Options?

According to http://www.trimet.org/pdfs/ridership/busmaxstat.pdf, the actual cost of a MAX ride is about $1.50, meaning that those who use a ticket for only boarding (say going to a Blazer game or other event longer than then the time the ticket is valid) pay more than their share of the cost of MAX and generate an operational profit for TriMet.  (Transfers, discounted tickets, passes, Fareless Square, etc wipe out a general profit).

This does not include the capital cost to construct MAX, but it leaves money afterwards that can be used to pay for it.  In addition, the capital cost divided by the number of years the rails/trains/etc last, divided by the number of boardings per year is pretty small.
Saturday, September 15, 2007 4:27 PM by Jason McHuff

# re: MARTA Profits Around the Corner? Maybe Transit does have Pricing Power Options?

"MAX ride is about $1.50, meaning that those who use a ticket for only boarding (say going to a Blazer game or other event longer than then the time the ticket is valid) pay more than their share of the cost of MAX and generate an operational profit for TriMet."

Looking at that data in that manner is completely inappropriate.

One person covering 20-30% and one person only covering 10% of the ride is not "paying more than their share".  The ticket cost on transit is barely more than 80% in the BEST SCENARIO possible and in the worse, well, I'd be amazed it reached 2-6%.  For instance a $2.00 3-zone pass for a MAX ride to downtown, or worse Gresham is easily a $30-80 dollar trip in overall costs.  If we just count operations it is still a $15-40 dollar trip.

The tickets are small beans compared the income taxes that get poured into the system to compensate.  Saying someone payed their share respective of a ticket purchase is just absurd and statistically irrelevant.

Now if you where to say I payed my fair share by paying the ticket AND the excessively larger percentage of income that I pay toward the system, you would be a little more valid.  But the fare, again, is nothing and in a moral and honest world wouldn't validate one for a free wheel barrel ride down a hill let alone a ride on a multi-billion dollar transportation system that has no financial sustainability.
Wednesday, September 19, 2007 9:43 PM by Adron B. Hall
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