As a result of high and rising transit costs, many transit agencies in the United States and throughout the developed world have sought alternatives from the competitive market: sale of assets, deregulation (load shedding), and competitive contracting
A. Sale of Assets
The sale of assets and operations to the private sector is appropriate for profitable public services. Public transit, however, is generally unprofitable in the United States and Western Europe. U.S. demand for transit—transit market share—is low and continues to decline. Less than 2 percent of all personal trips in 1990 were made by public transit, most during morning and afternoon rush hours. For most transit routes in the largest cities, ridership is so low that even cost-efficient transit operators could not collect sufficient fare revenue to cover capital and operating costs. In addition, transit is overcapitalized. Public transit facilities tend to be larger than private facilities, and they tend to be in high-cost locations. Lacking competitive incentives for efficiency, public transit probably owns more vehicles than would be needed to produce the same service by the private sector. Assets could be sold to commercial transportation operators only at a loss.
B. Deregulation (Load Shedding)
In most metropolitan areas, the public transit agency is the only legal provider of public-transit services. Private entrepreneurs may be arrested, fined, and their vehicles impounded for offering non-subsidized transit services to the public. Transit can be provided by the private sector without subsidy in some areas and for some routes as it is in areas of New York and Miami. Deregulation could save public money; it could result in innovative and responsive van and bus service, particularly in low-income minority neighborhoods; and, because of low barriers to entry and almost universal driving skills, it could foster the development of entrepreneurial activity, particularly for minorities, as it has in South Africa. State and local ordinances that give the transit agency the exclusive right to operate or regulate transit services could be modified to permit free entry (subject to minimal regulatory requirements for safety, insurance, proper licensing, and coordination) of commercial transit services.
C. Competitive Contracting
Competitive contracting is the most viable private-sector solution to high and rising public-transit costs in low-demand markets such as United States cities and where full public control of transit is desired. Competitive contracting is used by a small but increasing number of U.S. public-transit agencies to provide cost-effective, safe, reliable transit services.