– Inefficient TransLink needs to tender-out transit services

The Straight

by Maureen Bader

Ever wondered why airline fares have fallen dramatically over the past few decades but public transit fares have gone nowhere but up? It’s because the airline industry has gone through dramatic reforms while public transit providers, such as the Lower Mainland’s TransLink, have not. Until TransLink is reformed, transit riders and taxpayers can expect to continue to pay more for less.

As a June report by the Conference Board of Canada shows, growth in airline industry productivity (a measure of how well resources are used to create goods and services) was faster than growth in productivity of the economy as a whole. Airline industry reforms transformed the sector into a strong contributor to economic growth in Canada. Public transit, on the other hand, has seen its productivity fall, acting as a drag on economic growth.

Three reforms boosted airline industry productivity: ownership change, price deregulation, and competition. Air Canada was privatized, fare decisions no longer required government approval, and the Canada-U.S. open skies agreement brought more competition to the sector. However, the biggest source of improvement—increased competition—helped bring down fares for consumers. Falling airline fares meant airlines had to bring down costs, which improved productivity—they got more from less.

TransLink has no such cost discipline. This means management caves in to any excess salary demand because any cost increase is just passed along to bus riders as higher fares or to taxpayers as higher taxes. Productivity falls because we get the same or less for more.

TransLink’s management needs to figure out how to reform the public transit system. Still, today, many people defend the TransLink status quo because they believe public transit has social and environmental benefits. But those benefits, whether real or imagined, are no excuse to run a bloated, wasteful government system.

As the Conference Board report concluded, higher productivity growth brings lower airline fares, while falling productivity in public transit has translated into higher public transit fares. If TransLink does not improve public transit productivity, its demand for tax and fare hikes will continue and any social or environmental benefit it might be delivering will erode further.

But is the airline industry special? Can the same reforms happen with public transit? Reforms in Europe show how public transit can be improved for the benefit of both taxpayers and transit riders.

Public transit in Europe faces the same challenges we do—declining urban density. Governments there, faced with ever higher and more unaffordable subsidies, looked for alternatives. One alternative was to competitively tender-out the right to operate a transit route to a company for a period of time.

In England, the City of London tendered-out the operation of its bus service. Between 1984 and 1999 productivity of the bus service increased by 3.7 percent—meaning it cost less to transport passengers for every dollar of capital and operating expense. Competitive tendering also brought an 11.7 percent increase in ridership during the same period. Thanks to this success, London continues to tender-out bus services.

TransLink could learn a thing or two from the London experience.

For TransLink, between 2005 and 2008 productivity has declined, as the cost to transport one passenger one kilometre increased by 19.1 percent. TransLink’s own 10-year plan shows operating expenses and debt servicing cost will rise by 20 percent between 2009 and 2011 alone, while ridership is estimated to increase by only 2.3 percent per year to 2012 and 1.5 percent annually thereafter. There is no indication that TransLink’s share of Lower Mainland trips will increase beyond its historic share of approximately 11 percent.

TransLink wants another $450 million per year to continue expanding its expensive, heavily subsidized system. Taxpayers are expected to pay more and more for a very small, if any, improvement in ridership.

When the premier says TransLink needs to reduce costs before it gets more tax dollars, he is right. As both the Canadian airline industry the European transit experience show, transportation is a service that can achieve higher productivity with the right type of reform. Instead of continuing to be a high cost supplier of transit services, TransLink needs to tender competitively to reduce both its costs and its fares to boost unsubsidized ridership. Until real reform occurs, it’s TransLink that needs to take a hike.

Maureen Bader is the B.C. director of the Canadian Taxpayers Federation

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