Privatizing SEPTA

I know it will never happen, but what if SEPTA were privatized? How would a private firm change SEPTA service to turn a profit. This is a useful discussion because if SEPTA were forced to think/act like a private company, it would have to be much more efficient to survive.

Would a private company have to raise rates, choosing to price some needy people out of the system in exchange for more money from those who can afford it?

Would a private firm cut back or reduce off-peak service, focusing on serving the 9-5 commuting crowd?

Yes, I realize that as a quasi-government agency, SEPTA is expected to take some losses to provide transportation services to those who could not otherwise afford it. But it is interesting to talk about the what ifs of privatization. Are there any totally private companies that run regular rail trasportation? Are they completely unsubsidized?

The record, in that regard, of the private transit operators in Philadelphia, with the exception of the Red Arrow Lines, was no better than that of Septa. The city had been making noises for more than ten years, for instance, about buying and operating the PTC, and it was the provision of subsidies to the PRR and Reading for the suburban services ( now the RRD) by SEPACT that was the first step toward the creation of Septa in the first place.

Stangely I was thinking of this very subject yesterday. To the best of my knowledge, there isn't a single passenger rail system in the world that is not subsidized. The UK system (that ain't working so well) has the government dealing with the infrastructure and private operators for the actual running of the trains. I'm sure what ever arraingment MBTA has with the operator of their commuter trains (use to be Amtrak) is the arraingment they would use. Maybe someone over at that forum could answer the question on funding and profit.

I'm sure privatization will happen with some commuter railroads but as mentioned, not with SEPTA. Some bus systems as well as many school bus systems in this country are run by First Transportation who in the UK run trains an buses.

As for the MBTA, its not really a privitazation so much as a public agency paying a vendor to provide a service, instead of hiring its own employees to do the same. I think a lot of folks up here aren't that impressed -- I'm not a commuter rail rider, but I think the general feeling is that little has changed since when Amtrak was running the railroad, with the exception that a lot more coaches are out of service (shortening train consists, a lot of broken AC too). Could be that the contractor is finding out that they low-balled the bid, and are having trouble keeping the operation afloat. Its still to be seen where that leaves the operation.

My two cents on it, though, is that the T's arrangement has the public agency pay for not only the operation, but also for Connex and Bombardier and the other partner companies to make a profit, whereas they could just run the railroad themselves like NJT, SEPTA, or NYMTA do.

flynnt wrote:I know it will never happen, but what if SEPTA were privatized?
How would a private firm change SEPTA service to turn a profit.
This is a useful discussion because if SEPTA were forced to think/act like a private company,

Well, perhaps a better business model is that of a wholly owned subsidiary, another kind of business that's not really "there to make a profit" but there to provide services to a larger corporation.

A form of vertical integration where the job scope is to provide raw materials and workers.

I think that in essence, that's what the commuter rails had always been to
the Center City businesses.

Hal

How would a private firm change SEPTA service to turn a profit

They wouldn't and they couldn't. Private firms run rail and bus under contract to government, not out of their own pocket. Note the above-mentioned example of "Massachusetts Bay Commuter Railroad", which is basically Connex under another name. (BTW, Connex lost their operating contracts in the UK for just the same train-shortening practices.)

In case you are curious, there are a number of "private" bus operators that run in competition to NJ Transit Bus, out of the farebox as it's termed. The condition of their vehicles is horrendous and unsafe; the drivers are very pushy when it comes to getting as many people as possible to ride; and if any mode of transportation will make one seek their own car, such bus operations are it.

Well, perhaps a better business model is that of a wholly owned subsidiary, another kind of business that's not really "there to make a profit" but there to provide services to a larger corporation

That was deemed illegal back in the days of streetcars. Utility companies were running streetcars at a loss and offsetting the loss to reduce their tax bills. The government said "no, you can't do that"; and IMHO that was one of the factors that helped NCL along.

Privatization is not the answer, unless you are looking to revert regulations to the days of yesteryear when the operations were indeed wholly private and the conditions were such that companies could offset their losses...

Are there any totally private companies that run regular rail trasportation? Are they completely unsubsidized?

Supposedly, the Haneda Airport Monorail in Japan is completely profitable, although it was not built by private companies (it's fully in private hands now). However, I got that info from Monorails.org...

The problem with privatizing public transit is that it would probably devolve to one of two models. On one end you'd have a fully private firm that would do things like cut lines that weren't profitable even if they provided a necessary function like transporting students or hospital workers. At the other, there would be a "private" firm that was subject to all sorts of government-imposed regulations but had to make a profit at the same time (see Amtrak, Bush-version).

Remember, one of the things that did in a lot of the old streetcar companies was that the government tried to regulate fares and routes but didn't give them any help when they couldn't turn a profit. Yes, there were many other factors but the regs were definitely high on the list. The PTC's response, for ex., was a deferred-maintenance policy that let lines and equipment rot but saved $$.

I know I'm gonna sound like a (please, no flames) socialist but it seems to this Goldwater Republican that there are just some things that have to be paid for out of the public trough, like police and fire protection, mail, and education. Everybody benefits from those services whether they use them directly or not. A bunch of posts back I gave the example of my father-in-law who grew up in Saxony in central Europe. He had to leave school at 14 because his family was too poor to pay for the private school system. When he came to the U.S. he ended up just shy of a Ph.D. thanks to things like a public high school and the G.I. bill.

The killer in this is how to break the Soviet-era bureaucratic mindset that afflicts so many public organizations in the absence of the profit motive. My wife once worked for a nonprofit company whose mantra was "act like a public service but think like a private corporation". They did and were/are at the top of their field. My guess is that they were one in 10^6 among similar firms.

As has already been mentioned, privatization (please note correct spelling) isn't going to make SEPTA turn a profit. However, it could make SEPTA more efficient, so we could get more and better service for the dollars the public invests in the system.

Speaking generally now, and not necessarily referring to SEPTA:

Some proponents of mandated privatization want it in order to get the system out from union labor contracts they think are too costly, either in terms of wages and benefits that are more than private-sector companies pay, or in terms of work rules and job assignments that cause inefficiency (having to pay more workers than a private-sector employer would need to do the same job). There are genuine concerns about getting more service for the public as well as anti-union attitudes motivating these proponents. Privatization deals often fail to capture this efficiency benefit because proponents accept clauses in the privatization legislation that force competitors to honor the current labor contracts.

Privatization also can have a beneficial effect on management, by increasing accountability. It is much easier to dismiss a private contractor for performing poorly (see SEPTA's dismissal of some Paratransit contractors) than it is to dismiss employees of a public agency (this goes for line-level employees as well as management). Contracts for privatized service usually also do a better job of spelling out expectations and monitoring performance. In the public sector, results are often measured in terms of dollars spent and people employed rather than service delivered.

And it's also a lot easier to build incentives into a privatized system--pay for performance tends to be anathema to public-sector employees.

Finally, in some cases, you can have some efficiencies of scale, since a private operator may already have information systems and other administrative overhead paid for from other contracts and just has to pick up the small incremental cost of making it bigger.

On the other hand, payments to the private contractor have to allow for the company to profit(*), assuming a satisfactory job is done. So the public agency should have a leg up on costs.

And the private contractor has to pay taxes the public agency is exempt from. This should also make privatization a worse deal. But if you think about it, it's really a wash, since the government is giving money to the private contractor with one hand, while taking it back with the other.

So there should be some net benefit in privatizing a poorly-performing government service, and a possible loss in privatizing a well-performing service for privatization's sake.

When you're starting a new service, there are fewer obstacles to privatization, which is why most new commuter rail services contract out operations. (see MARC, VRE, Shore Line East, Miami Tri-Rail, LA Metrolink for example).

*--If you get really macro with this, those profits can be seen as the cost of capital, and should be offset by public savings from not having to put up and maintain the organization. (note: the above has nothing to do with the capital you invest in physical infrastructure etc.)

Now to be a little more specific about SEPTA and its railroad, the main benefit of privatization would be on the management accountability side. Following the 1983 strike, SEPTA's unit labor costs are less than those of Amtrak and the New York-area railroads, and work rules have been rationalized.

But SEPTA has a real problem with accountability, from top to bottom, as evidenced by the fact that nobody was fired and nobody even said boo about SEPTA's miserable on-time performance the last several years (it's now crept above 90% the past few months, but still isn't up to SEPTA's stated goal of 91%, which would still leave it the worst of the ten largest US commuter railroads).

When I visited my friend in London who was working at TfL (Transport for London), he said the privatization was successful. At least private companies were willing to invest more money into the system and the operation became more flexible.

Connex is an extreme case, for some reason this French company doesn't know how to manage public transportation (bus, train...). They are losing most of their contracts in UK. People do not have a big problem with other operators such as Stagecoach, First or Virgin.

Also, the National Rail can switch operators if they think the service is not
good enough. Stagecoach sub-branch took over Connex contract and the service improved a lot. That's what SEPTA can't do.

Finally, all railroad infrastructures in UK are builted and maintained by a company called Railtrack/Network Rail. UK government is no longer responsible for any train operation/engineering work.

Anyway, the forum/SEPTA should form a team to visit UK rail system.
Most operators welcome railfans, especially those from foreign countries.

The transport is not fully private in Britain. They still get government subsidy.

Matt is right, at least there would be some accountability. What about the possibility of some of these posts being elected officials instead of appointed ones? These guys need some incentive to perform. I can't stand it any longer this system is soooo bad

Elevators out of service (30th Street)
Ticket machines out of order in center city
Change machines that only accept the old-old $20 bill
Escalators sporatically out of service over the system
Poor scheduling with routes not meeting for easy transfer and minimal wait
Dirty cars (like the El)
Schedules out of stock at Market East (even though they only came out a month ago..bus routes)
Late trains
Minimal service during off peak periods (Fox Chase)
Inadequate consist sizes during peak periods (like 2 cars instead of 3)

I'll stop there but I could go on forever....and the problems are getting more frequent and worse. And the only recourse we have is to call customer service and complain and hope they follow up on it, like reprimanding employees that don't follow rules (like posting the train name on the side of the car, or having proper destination listed on the sign for buses).

Maybe SEPTA could modify some of their marketing signs so we know their real intentions:

"We're getting there"---should read "We're getting there, You're not"

"Never run for trains"---should read "Never run for trains, we want you to miss it so you can ride the bus instead"

I'm almost tempted to lobby Harrisburg to cut funding for SEPTA. They clearly don't deserve it. They don't make an effort to offer quality service or be customer focused. Let them shut down and let someone else take over, or set up some kind of quality system where SEPTA must meet some kind of criteria to 'earn' their subsidy. Enough of the free ride.

jfrey40535 wrote:Matt is right, at least there would be some accountability. What about the possibility of some of these posts being elected officials instead of appointed ones? These guys need some incentive to perform. I can't stand it any longer this system is soooo bad.

There are elected transit boards in some cities, particularly in California. It's not a panacea. For one thing, you run the risk of transit opponents taking over, especially if there is a major project being proposed and a possible increase in taxes. Another is that the elected boards can get very parochial (see BART for example), and the board members pay more attention to narrow interests of their district than interests of the whole system.

If you're interested in the subject, there's a good report from the Transit Cooperative Research Program on transit boards and governance. I don't have the link to it offhand, but the report was published last year, IIRC. It gives examples of different structures, and different ways of appointing board members, and it also includes survey results about relations between boards and general managers and other such topics. I haven't had time to write up an article on it for the DVARP newsletter, but it's informative, as a lot of other TCRP reports are. Well worth your time if you're serious about trying to fix SEPTA.

"We're getting there"

Ironically, Irish Rail use(d) the exact same slogan...

jfrey40535 wrote:Matt is right, at least there would be some accountability.

The only people that private businesses are accountable to is their stockholders. And this "accountability" is usually takes the form of making a profit, or at least not taking unreasonable losses. In the mass transportation of passengers, this works against the interests of the riding public when it comes down to a choice of continuing to operate "unprofitable" routes ( or simply adequately maintaining the equipment) or paying dividends to the stockholders. DC's Capital Transit ran into this situation in the late 1940's and early 1950's ,where its new management decided that maintenance should be financed out of the farebox, and paid stockholders a dividend while at the same time reducing maintenance. It lost the good will of the public, and most importantly, in DC, the U.S. Congress. Capital Transit's franchise was revoked by the Congress in 1955. ( After 9 months- O. Roy Chalk bid on, and received the franchise, and created DC Transit)

One of the selling points in favor of the creation of Septa ( in addition to the problem of the bi-annual PTC strikes) was this issue of accountablility. The PTC appeared to be accountable to no one, and it was felt, obviously erroneously, that a public agency would have a greater public accountability.