Friday, February 11, 2011

Credible commitment, transit planning and the obstacles of distrust

Transit agencies throughout the country--and likely throughout the world, but I don't follow those closely--are facing financial crisis. A non-trivial amount of the crisis is their own doing, but there are perverse incentives for construction and investment toward expensive systems that tend to go over budget and deliver fewer riders than promised.* In many cases as transit agencies build more rail systems they do so at the expense of bus operations. This has been established through lawsuits in New York City, Philadelphia and Los Angles, though the Supreme Court has established that such an investment strategy is legal.**

For these and other reasons, there is a lack of trust between the public and transit agencies. In New York, one survey by a local news station found a large degree of mistrust toward the MTA, and this attitude starts with the then-governor:
After Albany approved a rescue plan for the MTA earlier this month, Governor David Paterson declared his intention to clean house.

"The one thing that I learned through this process is that the public doesn't trust anything the MTA says," said Paterson.

The results of the latest NY1 poll* seem to back up the governor.

A combined 61 percent of those polled said they trust little or nothing the MTA says. Twenty four percent said they trust some, and just eight percent trust most of what the MTA says.

"Well, it seems to me a couple of years there was a surplus of money. Now suddenly there's trillions of dollars of debt that they're in, and I just don't trust what they think or say," said one New Yorker.

"They kind of echo the governor's sentiment in thinking that you can't believe a whole lot of what the MTA says," said NY1 pollster Mickey Blum.

In fact, much of the MTA's problems stem from billions of dollars of debt it was forced to take on because the state cut funding to the agency.

These quotes help demonstrate the complicated picture. No one trusts the MTA because the state takes their money. This is common and still happening.

Ultimately, these shenanigans with shifting money and poorly considered investment around are damaging to any transit agency's ability to plan. What happens is the public no longer believes that the agencies commitments are credible. Mike Manville and I have written about this phenomenon with regard to road pricing,*** and we believe it helps explain the public's rejection of new fees. It is not the only cause, obviously, but without trust that an agency will follow through there is no chance of gaining public support. The same principle applies to transit and the potential for new transit revenue streams and investment.

In the Twin Cities, distrust of the Metropolitan Council is hampering transit planning. The StarTribune reports:
The Twin Cities public transit system is "fraught with distrust" as feuding bureaucracies fail to set priorities in the best interests of the public, the Legislative Auditor reported Friday.

The unusually blunt report lays most of the blame on the Metropolitan Council, an appointed group that oversees regional transit, saying it "lacks adequate credibility and accountability."

While daily operations of the Twin Cities bus and rail transit are among the more efficient and reliable in the nation, Legislative Auditor Jim Nobles said, the bureaucracies have deprived the Twin Cities of a well-planned transit system.

"There is no agreed-upon way to determine which projects are best for the region," audit manager Judy Randall told a legislative commission that heard the findings. "There's widespread belief that the next transit way to be developed is the one that is ready next, or the one that has the most political capital behind it, not necessarily the one based on ridership projections."

And this is on the heels of a recent legal ruling that argues:
A federal judge on Thursday criticized planning for the Central Corridor light-rail line, saying it failed to consider all the interests of nearby St. Paul businesses, but he rejected a request from them and homeowners to halt the project.

U.S. District Judge Donovan Frank concluded that the Metropolitan Council and other transit planners were "deficient in ... consideration of lost business revenue as an adverse impact of the construction."

But Frank said the planners, residents and businesses should work together to resolve problems.

"At this stage, the Court concludes that the interest of the general public to keep this important project moving forward outweighs the harm to plaintiffs," he wrote.

Metropolitan Council Chairwoman Susan Haigh issued a statement saying she was "encouraged by the judge's decision ... the judge declined to delay the project."

A coalition of black businesses, nonprofit groups and residents sued Central Corridor light-rail line planners a year ago, claiming they had inadequately analyzed potential negative effects of the nearly $1 billion project. The suit also said measures to deal with those effects were insufficiently considered.

It named the U.S. Department of Transportation and the Federal Transit Administration as defendants, along with the Met Council.

Taken together, these and countless similar stories suggest that transit agencies are at risk of losing public support. In a time of financial crisis this is a potentially grave situation and will have a dramatic effect on transit agencies' ability to generate enough revenue to pay for operating costs of the systems they have and have planned. Credible commitment is a real concern that will be extremely difficult to solve.

*For cost and projection problems see "How common and how large are cost overruns in transport infrastructure projects?" BENT FLYVBJERG*, METTE K. SKAMRIS HOLM and SéREN L. BUHL, TRANSPORT REVIEWS, 2003, VOL. 23, NO. 1, pp. 71-88
**See "Fairness and the Fare" by Richard Briffault, Elliott Sclar and Walter Hook (1998) for details. If you can't find it let me know and I can arrange a copy for you.
***Forthcoming. Send a note if you want a copy of the working paper: "Credible Commitment and Congestion Priicing."

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