Learning from History

Today’s lunchtime perusal of the LA Times brings an interesting article about a transportation forum recently held at the Peterson Automobile Museum. The forum, which discussed the proposed “Subway to the Sea”, was focused on how to fund the project. Everyone showed support for a subway, including representatives of Santa Monica, West Hollywood and Beverly Hills. Everyone also agreed it would take bundles of money that have yet to materialize. L.A. Councilman Tom LaBonge said he favored a parcel tax on L.A. County residents and said he thought that most people would pay $52 per year to fund transit projects across the county.

Yet there is another proposal out there. L.A. Councilman Jack Weiss last week asked the city to study whether a public-private partnership could be used. The idea would be to allow a private firm to build and run the subway, with government oversight. Weiss believes that “Private capital markets are enormous, and maybe there’s a way to tap them”.

Me thinks that the honorable Mr. Weiss doesn’t know his history.

Many people have heard of the famous Los Angeles “Red Car” system. It was made popular by movies such as “Who Framed Roger Rabbit?”, and there is a popular theory that what killed the “World’s Greatest Electrica Railway System” with “1000 miles of standard trolley lines” was a conspiracy of GM, Firestone Tire, and Standard Oil. Of course, this theory isn’t true for Los Angeles. So what killed the Red Cars (and its system system, the Los Angeles “Yellow Cars” Railway)? The simple answer is: a public-private partnership.

Any road network is inherently subsidized. The users of the road, both public transportation and private vehicles, pay for its upkeep through taxes, and thus tend not to realize the costs. This isn’t true for a rail network, where the railroad companies must pay for the right of way, must pay for construction of the rail lines, must pay for upkeep and maintenance on those lines, and must pay for the vehicles and infrastructure on those lines. Even if government was to acquire the right of way, over the long term, the other costs are sizable and are only recouped via revenue. But revenue is tricky: the PUC typically places caps on what can be charged, and there is only so much that can be charged before people stop using the transit.

That’s the real factor that killed the Red and Yellow Cars. The Pacific Electric (and LARy) for years applied for fees that would allow them to recoup costs and improve infrastructure. They were repeatedly denied fare increases by the PUC, which demanded service improvements. So, the PE and LARy bought busses, which ran on streets (paid for via taxes) vs. private right of way. The busses also gave them flexibility in routing as the city grew and transportation needs changed. It is what could kill a private subway, and it is what led to the creation of the first MTA — private “public” transportation wasn’t profitable.

Yes, there is the chance that a private subway could succeed. But to do so, the stars would need to really align. First, gas prices would have to rise sufficiently to offset the fares (remembering that as gas prices go up, the cost of the electricity for the lines also tends to go up). Secondly, there would need to be sufficient additional income, likely realized by the sale of advertising space to bombard the captive audience: seat ads, station ads, video screens in stations, etc. (such advertising wasn’t pervasive in the PE era). Thirdly, the lax MTA fare enforcement would have to be strengthened.

Folks like Mr. Weiss need to remember that California is not used to tolls. As I recall, the Foothill Toll Lanes (i.e., Route 241, 261, 73, and portions of 133) are just starting to break even. The Route 91 Express Lanes weren’t successful, and ended up being purchased by OCTA. I don’t know the profitability of the HOT lanes on I-15 near San Diego, but I think those are more capacity controls than profit based. The Bay Area is primarily used to toll bridges, which are a distinctly different thing.