Christopher Leinberger in the Atlantic is wondering if we can go back to the early 20th century practice of letting developers build rail transit lines, and reap the resulting increase in property values. This idea is likely to have a lot of superficial appeal, because it combines two pervasive attitudes in New World countries: (a) nostalgia for a supposedly simpler past and (b) a suspicion, especially common in the US, that government is always intrinsically less competent than the private sector.
But as someone who’s been around a lot of privately-funded transit projects (usually called public-private partnerships or PPPs) I think it’s important to pour some cool if not frigid water on the idea:
- Most construction projects that were financially viable in 1900 would not be viable today, including the foundations of the great rapid transit networks that we see in Europe and New York. In 1900 there were no environmental laws nor many labor laws of substance, so of course construction was vastly cheaper. (This point needs to be raised not just in response to privatization-nostalgia arguments such as Leinberger’s, but to all forms of nostalgia about old technologies.) It’s tempting to believe that we build subway lines so much more slowly than Europe did around 1900 because we’ve lost some collective will. While that’s partly true, it’s also true that the values of today — especially as they relate to environmental impact and labor — are different, and more expensive, than they were back then. Countries that are building rapid transit today, such as China and India, generally have much lower labor costs and less onerous environmental impact processes (which is to say, much less effective ones).
- A constant frustration around PPPs is the suspicion that government inevitably has the weaker hand in negotating them, and that as a result the benefits flow primary away from the public purse.
- Private enterprise is efficient only in response to competition. Construction work on a rail project almost always goes to the private sector, because it’s easy to set up a robust competition for that work. But it’s harder to expose the private sector to competition when one company or consortium takes over planning and financing as well as construction. In Australia, the privatization frenzy has given us privately owned road tunnels and privately owned pieces of urban rail networks. No competitive pressure operates on the toll-collecting owners of these projects after they’re built.
- When we’re talking about privately owned bits of a larger network, it can be hard to get the necessary integration with the rest of the network. Privately funded pieces of transit infrastructure often need higher fares than the publicly-owned bits, and these add complexity to the fare system.
- A private operator of public transit will care about total revenue but may not care about ridership. A few high-paying riders give you as much revenue as a lot of low-paying ones. But we the people DO have an interested in services that carry more people, and that interest is hard to manifest in typical privately led rail projects. Sydney has one privately built segment in its rail network — the four-station Airport Line — and its fares ($15 one way, airport to city) are so high that it’s cheaper for me to take a taxi. The two non-Airport stations on the line have missed out on a lot of redevelopment opportunity because the fares are just too high for the system to be useful.
- Finally, developer-funded rail lines were used around 1900 to open up huge greenfield areas for new urban development — greenfields that tended to be consolidated under one or a few owners. Today, we would call that sprawl. Today, also, land ownership is much more divided and hard to organize, even on the suburban fringe. Rail lines intrinsically bring their benefits to a large area, and only the government is usually in the position to spread the costs correspondingly widely.
In both the transit industry and the urban design world, we hear a lot about how great things were in 1900. But I’m glad to be living now rather than then. Aren’t you?
UPDATE: In respose to a superb opening comment by Alex Block, let me clarify that I am not arguing against value capture or tax-increment financing, which Leinberger also endorses. These are methods of financing a rail line partly through debt that will be repaid based on higher land values — and thus higher land taxes — that the line will generate. There is no reason we can’t continue to expand on these principles as a revenue source. I’m criticizing only the more simplified nostalgia on which Leinberger builds his argument.