Benefits of Opening the Urban Transit Marketplace

in Issue Analysis
Photo: Unknown. Public Domain

The Covid crisis has left a lot of government agencies scrambling for funds and it would be a benefit to Libertarians if we offered some open market alternatives to replace the government ones. Urban transit would be a good place to start.

The transit agencies may be having serious problems because as ridership has declined their fares have been reduced. As fares were reduced so were services which left some riders looking for alternatives. If they bought a car the agency has probably lost that person’s business as a fare paying rider. In some cities urban rail has lost more than fifty percent of their riders. Buses have seen similar, if not worse, declines in some places. Libertarians should be promoting the idea of opening the transit marketplace to the private sector all the time and now may be an opportunity to get our ideas across.

Put yourself in the position of a retired woman who lives alone and depends on Social Security for her income from which she receives $1,125 a month. Her studio apartment costs $800 which is an average estimate from one source. Insurance for rent and the car plus gas would cost about $170 a month. That doesn’t leave much for food or anything else. However, if this woman could eliminate the car she would save about $130 a month for other uses. The government dial-a-ride services requires you to make a trip request 24 hours in advance which eliminates most emergency trips. Fares on the jitney’s in Bergen New Jersey start at $1.50 for a short trip and go up. Maybe our lady lives close to a grocery store and can get by on a couple of trips a week which means she would spend $6 for a round trip twice a week. At $30 a month for fares having access to such a service would save her money. Unfortunately, that type of service has been outlawed in most U.S. cities.

Six percent of white households do not have a car. Fourteen percent of minority households don’t have a car, and for African Americans specifically, it is 18%, or three times that of whites. (

Out of work because you lost your job? Need to make some extra money? Or just want the dignity of owning your own business?

In many cities getting approval to own and operate a private transportation service can be difficult and if you are competing with the local bus agency it is almost impossible to get permission, regardless of whether the private providers are mom and pop businesses, co-ops, corporations or some other form. Offering people an opportunity to fill a need should not be so difficult it gets tied down with high fees, licensing laws, and red tape. Having the owner/operator behind the wheel offers a lot of benefits. It takes management out of the office and saves money by putting them behind the wheel. It may also reduce the costs of maintenance by having the driver work with the dealers to provide maintenance instead of having the bus agency provide it as is done now in most places.

In 1914 the private transportation business using a car was started when L.W. Draper, a Los Angeles car salesman took advantage of a crowd on a streetcar route in and decided to offer those waiting a ride. Draper is recognized as the first person to use his own auto to offer the public a faster way to get to work than waiting around for a streetcar to arrive. These vehicles became known as jitneys, because the cost was a nickel which was also known a jitney. (

Within a year there were some 62,000 jitneys operating nationwide picking up people in an estimated 700 cities who would have been riding streetcars. That reduced the profits the streetcars earned and benefits they provided cities with such as fixing the streets and providing no costs transportation for some city workers. What really got the attention of city officials was the decline in taxes the city received when streetcar fares dropped. That reduction in taxes quickly caught the attention of the city fathers across the nation and by 1918 regulations had killed the jitneys across much of the nation except for San Francisco, Atlantic City, New Jersey, and a few cities where even today private share ride vehicles known as gypsy cabs still operate. Uber, Lyft, and a number of other businesses have cropped up in the last few years. But they also have been subject to assault by lawmakers.

In 1935 Congress passed the Public Utilities Holding Act which required the electric companies, which owned most of the streetcar companies in the nation, to sell their streetcar businesses. Because the streetcars were subsidized by the electric utilities, they were often unprofitable and after a period of lawsuits over the law, they were shut down. The General Motors streetcar business, known as National City Lines, has often been blamed for much of this problem. In fact it was more myth than anything else.

Then in 1964 the Urban Mass Transit Act gave $375 million to cities for transit, followed by President Nixon’s $12 billion and President Ford’s $11.8 billion. (

Since then many jurisdictions have taken over the private system that operated in their area or started the own system from scratch.

In 2016, more than 6,800 organizations provided public transportation in a variety of modes. An estimated 4,580 non-profit providers make up the majority of these public transportation organizations. Systems operating in urbanized and rural areas receive grant money from the Federal Transit Administration (FTA) and report to the National Transit Database (NTD) as full, reduced, or rural reporters. Out of the 2,222 NTD reporting systems, 1,295 are in rural areas and 927 are in urbanized areas.” ( Page 5)

The systems located in urban area should be the easiest to convert to the private sector. In many cases we will find that the quality of the service is poor in low income areas and during times that low income workers need the service the most. This is most important for people, such as working mothers, who have a job as a register operators at the local grocery store and or who work in the janitorial sector or need a way to get safely to and from work without spending a lot of money doing so. This is where a ride sharing business might be helpful that is presently illegal.

Zoning and other urban projects have increased the costs of urban transit, along with the costs of anything that has to be delivered to your door over the last fifty years whether it is the mail or an emergency medical technician.

Reducing those costs will require big changes in urban zoning but in the meantime we need to find ways to improve transit and provide the services to more people in this ageing society. That will require some innovation which seems to be lacking when it comes to government agencies.

A study, the TCRP 49, reads, “The lack of personal mobility has economic, social and human costs, such as higher unemployment, reduced tax revenue, greater welfare and medical costs, and limited social potential.”

  • Women: “…23% of full-time working mothers and almost 60% of part-time working mothers have non-traditional work hours.

This reduces women’s ability to join carpools or find appropriately scheduled transit options”.

More recent information on minorities informs us that while 6% of white households do not have a car 14% of minority ones do not and the hardest hit are Black households where 18% do not have access to a car. (

Do you want to reduce urban auto emissions? A recent study showed that a car got better mileage per passenger mile than a transit bus did. If so, consider using passenger vans which carry 10 to 15 people and with owner/operators behind the wheel. ( Most city coach buses cost $500,000 or more, get 5 miles to the gallon and often are nearly empty. The passenger vans cost about $50,000 or one tenth of a coach bus and get from 10 to 15 miles per gallon.

In the event of an earthquake a transit system that relies on rail, such as a subway, or light rail may be damaged but a system that is run using small twelve to fifteen passenger buses with independent/owner operators behind the wheel is flexible and more likely to be working to some extent.

In Bergen, New Jersey a system of small mini-buses that are private, and profit making, charge less than the government run buses, and run every few minute is available to the public. (

Contracting out may be best in some areas. A study from the international consulting firm L.E.K. Consulting looks at the benefits cities worldwide, and notes that services provided by private organizations can be delivered more efficiently than government agencies and that the savings are from twenty to fifty-five percent. With their contracts and profits at risk, the private organizations have every reason to be open to innovation and focus on the quality of the customer services. (

The international corporation Transdev operates in seventeen countries providing bus, rail, streetcar, and paratransit services. In the United States they provide services to two hundred cities. (

Curitiba, Brazil, often mentioned as one of the world’s best system and where Bus Rapid Transit was born, “…has one of the highest car ownership per-capita rates in Brazil. More than 60 percent of overall travel in Curitiba is by bus. But the city’s gasoline use per capita is one-third below that of eight comparable Brazilian cities…”

“Curitiba … contracts out the service to 22 private companies, who operate the buses and taxis and share revenues with the city to support road maintenance and upkeep of the terminals.” (

From color-coded vehicles to ride-sharing, innovation is the future of urban transit. To a great extent its success depends on the design of the contracts and the quality of oversight; private organizations can provide the services needed, save tax dollars, reduce auto emissions, and improve the quality of services as well.