Tag Archives: Germany

Seeking clarity on WMATA transit governance – operations vs regional funding and coordination

WMATA logo on a 7000-series seat. Creative Commons image from Kurt Raschke.

WMATA logo on a 7000-series seat. Creative Commons image from Kurt Raschke.

It’s not easy to do two things at once. Particularly when you have two very different tasks, one might get more attention than the other – or the goals for each might blur together in your mind.

Keeping these tasks distinct is a challenge. Jarrett Walker often speaks about the distinction between transit systems that focus on providing coverage vs. maximizing ridership, and the importance of thinking clearly about the two goals.

The current public dispute among WMATA’s Board of Directors about the preferred qualifications for a new general manager exposes a similar rift – with some members preferring to focus on a seasoned public transit executive (an operator), and others looking for a business-oriented financial turnaround manager.

As a transit agency, WMATA has to fill several disparate roles (thus the search for a single leader with super-human capabilities):

  • Operate regional and local bus transit, as well as the regional Metrorail system
  • Coordinate regional transit planning
  • Provide a regional transit funding mechanism

The latter two tasks (planning and funding) can be somewhat grouped together. WMATA’s Board of Directors is therefore charged with two rather disparate tasks: to oversee the day-to-day management and operations of a large regional rail and bus system; and to coordinate and fund that system across three state-level jurisdictions.

These disparate roles present plenty of challenges for WMATA’s leadership – just look at this list of tasks facing WMATA’s future GM, ranging from safely operating the system to uniting the region. Piece of cake – anybody can do that! Super heroes need not apply.

Absent any regional government, the WMATA Board has no choice but to act as a proxy for a regional legislature. While state-level governments might be anachronisms, they’re also not going to disappear anytime soon. Twitter-based WMATA reformers will call for ‘blowing up the compact’ and replacing it with… something. Aside from the Federal government, an inter-state compact is the only form of cross-border regionalism we have available to us. Others call for direct election of Metro board members. It’s an intriguing idea – BART’s board members are elected – but BART only operates a regional rail system. There’s only one elected regional government in the US, and it is wholly contained within a single state.

The medium-term fiscal outlook for WMATA shows an unsustainable trend of rising costs and stagnant ridership and revenues. These trends have stressed the agency’s business model, which requires member jurisdictions to pitch in to cover the annual operating subsidies.

However, the most recent breakdowns in WMATA’s reliability demand greater oversight on the agency’s primary task: safe and efficient operation of the regional transit system.

Instead of arguing about the preferred qualifications for a general manager, this dispute should open the door for a broader conversation about the system’s governance and how it can best tackle the different tasks as a transit operator and as a regional governing body.

During WMATA’s last crisis and most recent round of governance reform proposals following the 2009 Red Line crash, David Alpert hit on the challenges of the different roles for the WMATA Board. Given the different needs, David went so far as to suggest two separate boards for WMATA. Too many reform proposals seemed to talk past the different tasks required of the agency’s leadership – operational oversight and regional coordination.

The idea isn’t unprecedented. For example, in Paris, the Syndicat des transports d’Île-de-France (STIF) is the regional entity that coordinates planning, funding, and operation of transit in the region, and oversees the performance of the various transit operators it contracts with.

STIF negotiates with operators, holding them to performance-based contracts. In Paris, there are two primary rail operators – RATP, operating the Paris Metro, and SNCF, operating most of the RER and suburban trains. STIF also contracts with various bus operators.

The European Union issued mandates for how transportation companies must organize themselves, but the arm’s-length contracting between the regional planning body/coordinator and the local operators pre-dates these EU models. While these mandates for privatization and separation of operations from infrastructure are intertwined with this governance model, they remain a separate issue.

The idea of keeping operations and regional funding/planning at arm’s length seems to help sharpen the focus on accountability. It remains to be seen if the competitive tendering of contracts between transport associations and operators results in meaningful competition – after all, these kinds of systems are natural monopolies. But these contracts do indeed codify the relationships between the regional governance system and the operator, opening the door for maintaining accountability.

In these examples, the governance structure helps provide clarity about the roles and responsibilities for each participant in the system.

Governing transit: the regulated public utility

Public utilities, from Chris Potter. CC BY 2.0

Public utilities, from Chris Potter. CC BY 2.0

The MBTA is struggling, but they’re not the only transit authority facing both near and long-term challenges. The MTA in New York is trying to find the funds for its capital plan; WMATA is facing systemic budget deficits while trying to restore rider confidence in the system.

For-profit corporations such as airlines aren’t the right answer to govern transit in an American context. So, what kind of structure could work?

Writing at Citylab, David Levinson made the case for structuring American transit operations as regulated public utilities, able to pull the best elements of private sector management and pair them with the fundamentally public purpose required for urban mass transit.

David cites seven key elements of this model:

  1. Competitive tendering for services
  2. The ability to raise fares (with regulatory approval)
  3. Using a smartcard as a common platform for fare payment
  4. Specific contracts with local governments to operate subsidized service
  5. Ability to recapture land value through land ownership and real estate development
  6. Access to private capital markets
  7. Local governance, funding, and decision-making

These elements aren’t substantively different from the elements of German public transport governance reforms outlined by Ralph Buehler and John Pucher: competitive tendering for many services, increased fares, investments in technology to improve capacity, efficiency, and revenue. Public regulation oversees these efforts to operate the core business more efficiently.

Lisa Schweitzer (USC Professor focusing on urban planning and transportation) offered extensive feedback on her blog (in several parts). All are worth reading, I’ve linked to each and included a short summary and/or quote:

1. On the regulated public utility concept: “First of all, even though quangos [a British term: quasi-autonomous non-governmental organizations – what we’d usually refer to as a public authority] are somewhat insulated from voters and politics, they still have play with budgetary politics, and those games are where lots of stupid enters into transit provision.”

Schweitzer identifies three main problems with applying the concept to transit. First, unlike water or electric service, the demand for transit use isn’t universal. Aside from a few dense cities, there isn’t necessarily a built in customer base. Second (and related to the spotty demand for transit service), some jurisdictions can/do opt out of transit service, hurting the overall network. Third, unlike water or electricity, there are many different levels of transit service.

2. The challenges of competitive tendering: the devil is in the details for how to successfully structure operations contracts: “And that’s a really the key point for competitive tendering and service quality gains you hope to achieve: if you are going to to do this, you need to be clear on service expectations. The reason the cable guy gets to treat you like crap is that’s not part of the franchise agreement which centers on channels and rights for particular sports events–not customer service response times.”

3. Farecards and technology: Schweitzer notes that most transit agencies already offer smart farecards, but perhaps a regulated utility would have more incentive to invest in technology to collect additional revenues or adopt policies (such as all-door boarding, or proof of payment) that would speed operations and improve efficiency. This is really a matter of institutional incentives rather than simply adopting farecards.

4. Capital cost recovery: While Levinson argues that new transit lines should only be built if they can break even on fare revenues and value capture from adjacent land, Schweitzer counters that this formulation depends on the mode and the type of transit line:”Right now, you have jurisdictions with people who are very avid about wanting rail transit. We must have rail now.”

“You want a train? Fine. Either let us build 70 100-story apartment complexes next to the station (if it pencils for us) or you pay whatever portion of the capital and operating costs that apartment complex would have covered for the utility. Your choice. Again, rich districts can have their single-acre lots if they want, and they can have their trains if they want them–even if nobody wants to take the train and they just use it as decoration. They just can’t stick the rest of us with the bills for those trains.”

5. Asset values and access to private capital: This isn’t exactly a silver bullet. For as well as competitive bidding worked for London’s buses, the similar deal for the Underground flopped:” The Metronet-London Underground deal came about in 1998 in part because the transit provider, Transport for London, was financially stretched and their capital stock decayed. This is a big deal: taking over large capital stocks is risky, let alone doing so because you have to bail somebody out. It means you probably have crumbling assets with an uncertain price tag to fix.”

In London’s case, one rail company delivered on their agreements while another operator came back to the public for additional funds and eventually went into bankruptcy: “While newspapers blamed the public sector partner for failing to manage the contracts properly, the public audit on the deal cited Metronet’s own corporate governance and poor management as the primary reason for the failed partnership.”

6. Local funding: While Schweitzer sees the virtues of local funding, there are risks to completely forgoing federal funds. If there is a chance to reform things, it will likely involve the feds: “If we really do believe that there are normatively better ways for cities to be, then there is a role for federal governments to play in setting standards and incentives.”

David, freed from the space constraints of Citylab when writing via his own blog, responded in depth:

1. The regulated public utility model: “I imagine like most reforms, it would be phased in, tested, refined, and revised in the various laboratories of democracy. Some city has to go first, some other city has to go second, and hopefully learn from the first, before every last city does.”

2. Competitive tendering: “…the answer is quite complicated about how to configure to maximize consumer welfare, and experimentation is probably required. Just giving the system away is certainly not the answer. Having the franchises be of a limited duration (5-7 years, e.g.) is better than a 20-30 year franchise. This is feasible for buses where the capital is the ultimate in mobile capital. It would be much harder for a traditional utility where the infrastructure is expensive, embedded in the ground, and long-lived.”

In other words, it’s a lot easier to structure a deal for competitive contracts for bus operations than it is for fixed, naturally monopolistic rail services – both in terms of structuring the deal, and in terms of attracting operators.

3. Farecards: “I would go further and say we should have pre-payment via stop-based farecard reader, i.e. all significant bus stops should have arterial BRT like payment”

4. Capital cost recovery: “Capital investments are new stocks while operating expenditures are continuing flows. From a public policy perspective, continuing with existing commitments (which may be an implied social contract) may be more important than making investments that bring about new commitments. Thus new commitments (such as new rail lines which have irreversibly embedded immobile capital) should only be undertaken if we believe at the outset (admittedly a forecast, which have problems) that they have cost recovery.”

5. Asset values: “Investing in new infrastructure is a lot riskier than investing in already built infrastructure (thus the early financiers of the Channel Tunnel got wiped out twice, similarly the Dulles Greenway and many other privately funded pieces of new infrastructure that were either more expensive than expected, or built too far in advance of demand.”

The broad concept of a regulated public utility has a lot to recommend: it threads the needle between the public purpose inherent to modern transit, while also pulling the best elements from private enterprise and the benefits of running a service-oriented business like a business.

While demanding additional efficiency from transit operators, German public policy worked in concert with these reforms – traffic calming, dense development around transit stations, and increased taxes and fees on car-based transport both improved transit’s attractiveness and also provided new revenue sources.

As Dr. Schweitzer notes, the single biggest take-away from Levinson’s article is the concept of transit as a public utility in the first place. Getting over that mental hump can open doors to plausible reforms.

What might those reforms be? In addition to Levinson’s list, Ralph Buehler and John Pucher offer their lessons from the German experience:

  • Encourage regulated competition; take advantage of private sector expertise
  • Collaboration between local governments, transit operators, and labor unions
  • Focus on profitable services – not to ignore ‘equity’ services. Jarrett Walker would refer to this as a focus on ‘ridership’ routes instead of ‘coverage’ routes – and building political consensus around this isn’t an easy task!
  • Collaborate with other transit operators; encourage easy exchanges between systems for passengers, interoperable systems, etc.
  • Improve service quality; focus on customer service.
  • Increase transit’s competitiveness with complimentary public policies – for example, increased fees on driving/owning a car, encouraging dense development near stations, etc.

All in all, the list is quite similar to Levinson’s.

However, in Germany, the push towards some of these reforms came from the outside (EU regulations); existing transit operators viewed them as a threat forcing reform and a new focus on customer service, efficiency, and overall quality – all while working to reduce costs. Similar to an airline facing bankruptcy, German operators used the EU mandate to find common purpose with their unions to improve efficiency and reduce overall costs.

Both Schweitzer and Levinson sing the virtues of local funding, but reform of this magnitude might require outside stimulus. In the same vein as Schweitzer’s defense of federal experimentation in policy, the federal government is well suited to fill that role. However problematic the federal focus on streetcars may be, the federal focus has certainly shifted the attention of local governments; the TIGER grant process shook up the traditional relationship between the FTA serving a few transit authority grantees. The projects might not be the best investments in mobility, but it does reveal the potential for the feds to drive change in transit governance.

Decreasing opportunities for incremental development in American neighborhoods

Several months ago, Charlie Gardner had an excellent, thought-provoking post asking why have American cities seen the demise of the duplex? In a time when growing cities are bursting at the seams and facing severe affordability challenges, an incremental kind of development might be welcome in many cities, offering new housing while allowing an evolutionary pace of change to a neighborhood’s physical fabric, instead of the abrupt transition of large-scale redevelopment. So why don’t we see more of it?

Consider international comparisons of small-scale incremental development: Charlie Gardner compares the built form on both sides of the US-Mexico border, noting how on the Mexican side houses grow incrementally over time, often adding new uses along the street. The net result is a slow transformation of the entire neighborhood, evolving towards denser development patterns. Gardner speculates on reasons for the difference with standard American development patterns (including finance and regulation), noting that the small-scale development open the door to homeownership at a much lower price threshold.

Conversely, there are examples of American neighborhoods adding units on a relatively small scale. Let’s Go LA has been tweeting highlights from Wallace Frances Smith’s “The Low-Rise Speculative Apartment,” published in 1964. The book documents the replacement of single-family homes with low-rise speculative apartments (often in the form of dingbats), concluding that this small-scale, relatively low-cost form of construction plays an important role in adding housing supply to the market. Without requiring challenging lot consolidation or more-expensive construction methods, this kind of incremental, small-scale development allowed neighborhoods of single-family homes to evolve into denser places – even without large incomes in the neighborhoods to afford expensive new construction.

Despite the small scale of each individual building, the net result was a substantial increase in housing production overall.

So, why don’t we see more of this today? While various New Urbanists might not like the specific dingbat product, the idea of small-scale urban density is still appealing. The so-called ‘missing middle’ forms, such as townhouses, flats, and small apartment buildings are all lauded as contextually-friendly ways to add housing and increase density in already developed areas. So, why are these housing types missing?

As Let’s Go LA points out, much of this kind of development has been regulated out of existence. In LA, large portions of the city have been downzoned; the newer zoning no longer allows for by-right development of dingbats and other small-scale apartment buildings. In aggregate, the result is a huge decrease in the potential development allowed in LA.

Much of that LA zoning potential would’ve been in the hands of small-scale landowners rather than large real estate development firms. One consequence of removing that development potential is to erode the ‘franchise’ for incremental development. Let’s Go LA notes that “by zoning small developments out of existence, we’ve made land development a much less democratic process, in the sense that far fewer individuals in the community are able to participate economically.” Instead, 20% of LA’s recent growth has been absorbed in the relatively small confines of downtown. While this is good for downtown (thanks to regulatory changes such as LA’s adaptive re-use ordinance and relaxation of off-street parking requirements – discussed previously here), limiting growth to such a small area of the city has consequences: “when growth is restricted across so much of the rest of the city, there will still be pressure on regional housing prices, and gentrification will continue.”

The phenomenon isn’t limited to LA or to dingbats. Stephen Smith, writing at New York YIMBY, looks at the demise of small-scale development (buildings smaller than five units) in New York: “Put simply: New York City’s small builders have been nearly eradicated. The segment of the market that normally produces about half the city’s new building stock has all but vanished.”

New York City building permits, by number of units. Chart from New York YIMBY, data from the US Census Bureau.

New York City building permits, by number of units. Chart from New York YIMBY, data from the US Census Bureau.

Smith considers several hypotheses for this decline in small-scale development, including the end of some tax abatement programs and weak markets in some parts of the city. Smith also hypothesizes that New York’s recent ‘contextual rezonings’ removed development potential from areas ripe for small-scale development:

The result is that many neighborhoods that were once full of redevelopment opportunities are now closed off to anything but the smallest of one- or two-family projects on vacant lots. This sort of redevelopment was largely banned after the implementation of the 1961 zoning code, but throughout her tenure Amanda Burden closed off the last few areas where it was still allowed.

DC is seeing similar conversations. Demand for additional housing often leads to ‘pop-up’ development, often in the form of vertical additions to existing rowhouses. The term even gets used as a catch-all for any kind of smaller scale infill development. Many existing residents are concerned about the changes (though others are supportive).

Responding to political pressure and resident requests, the Office of Planning proposed their own version of a contextual rezoning.However, during a hearing on the measure, one of the zoning commissioners expressed deep concern about the overall impact of reducing this development potential in a city with a growing population and decreasing housing affordability. Greater Greater Washington’s summary of the exchange captures the concern: “I just don’t think we have a comprehensive housing policy in this city and I’m worried about all the unintended consequences of [this proposal].”

While Charlie Gardner contrasted American urbanism to Mexico, there are other options as well. This paper from Sonia Hirt looks at German land use regulations. German zoning is guided by federal standards, localities have some flexibility within those standards but cannot add restrictions to the basic zoning classifications. One end result is that there is no such thing as a residential zone devoted solely to single-family homes. Likewise, even residential zones must accommodate commerce to meet the “daily needs” of the neighborhood.

In outlining potential routes for zoning reform in the United States building off of lessons learned from Germany, Hirt suggests that instead of relatively small areas of mixed-use zoning, planners could focus on a wider area of limited flexibility for residential development – something that might not look that different from the small, speculative apartment developments of the 50s and 60s; or of duplex development.

Global transit logistics

Matt Johnson at GGW has a short post with a wonderful video documenting the logistical process of delivering a new dual-mode Bombardier locomotive to NJ Transit after manufacture in Germany.  The video raises several interesting issues:

Logistics – the ALP-46, being built for North American rails, is too heavy to use existing rails for transport from the manufacturing plant in Kassel to the port in Hamburg.  As a result, a coordinated ballet of precise movements is needed to get the locomotive to the dock.

The coordination is fascinating to watch.  I’m reminded of some of mammoth’s recent posts on the global logistics supply chain, ranging from the world’s new largest vessel, the shape of infrastructure without architects as exemplified by a rail and container yard in Illinois, and commentary on the concept of the aerotropolis (breaking down the BLDGBLOG interview with Aerotropolis author Greg Lindsay).

The precision involved in moving cargo like this is always fascinating.  The connection/competition between seaports and airports (obviously, you’re not going to fly a locomotive like this for delivery) is also interesting, particularly in the vein of the role of just-in-time delivery and potential disruptions of supply chains from Japan’s recent earthquake/tsunami.

Manufacturing – The fact that such a journey for an American commuter railroad locomotive is even necessary is puzzling.  The vehicle is manufactured in Germany by Bombardier, a Canadian company.  It reminds me of the somewhat perverse consequences of Buy America provisions for US Transit systems, as well as the general lack of investment in transit.

Market Urbanism has commented on the impacts of these types of regulations, citing frequent commenter Alon Levy:

What happened in the 1970s was that the rolling stock market shrank, leaving American transit agencies with just a few US vendors. St. Louis and Pullman were fully protected by Buy American. As such, New York City Transit had no choice but to buy trains from them; the trains turned out to be defective, leading to breach of contract lawsuits that bankrupted both companies. Since then, NYCT has bought from foreign companies, following Buy America to the letter but not to the spirit. The first order after the St. Louis and Pullman disasters was imported from Kobe, as Reagan cut all federal funding, and went without a hitch. Subsequent orders required the vendors to establish US plants, but often only the final assembly is done in the US. In the most recent order, the car shells were made in Brazil.

Buy America does the opposite of leveling the playing field for foreign firms. It favors big players, which can land big contracts and establish US plants. The same is true for the regulatory structure: the various globally unique [Federal Railroad Administration] rules benefit companies that are big enough to be able to modify trains for the American market. Just recently, Caltrain’s request for an FRA waiver involved consultation with just the largest companies in the industry. There are a lot of smaller manufacturers that are shut out of the US market; they don’t have the capital to establish new overseas factories or pay lobbyists to write rules in their favor. Those include Switzerland’s Stadler, Spain’s CAF, the Czech Republic’s Skoda, all Chinese firms, and all Japanese firms other than Kawasaki. Those can occasionally land a US contract, but are usually unable to compete with Kawasaki, Alstom, Siemens, and Bombardier, whose US market shares far exceed their global market shares.

Transportation – As noted in the video, these locomotives are far too heavy to travel on German rails.  The fact that they can do so on American rails is a testament to the strength of our robust freight network, but it is also indicative of the unnecessary ‘tank’ mentality of US rail vehicles.  This kind of excessive weight (and the regulatory perspective that requires it) is biased towards heavy freight and detrimental to passenger rail of all kinds in the United States.