Equitable MRT and LRT fares through “out-of-the-box” solutions

The critical role that a working mass transit plays in urban development is obvious. A working mass transit system is one that can get a commuter to their point of exit within 30 minutes from entry into the system’s gates. Our MRT / LRT systems currently fail this test during rush hours what with the lack of trains for the volume of commuters. The long lines at times extend all the way to the street during rush hour in some stations. Upon entry into the train a commuter is subjected to indignities such as being treated like a sardine in a packed tin can.

Yet, the government is hobbled in improving the mass transit rail system to any degree because each commuter is subsidized to the tune of up to P48 per trip. Therefore, the more trains the government adds the bigger the subsidy. Worse, this subsidy is sourced from the general taxpayer where even those as far away as Tawi-Tawi who have never even seen the rail system pay for its upkeep.

The Aquino Government would now like to reduce or even remove this subsidy. One idea is to privatize the system. But what company in their right might will buy a system that loses about P7 billion a year (just the MRTline)?

Out-of-the-box-solution

So, we have two problems: a) subsidy for the current operations that the national government can ill afford, and b) expanding the system so that it conforms to the definition of a working mass rail transit system.

My solution would use two principles: the subsidiarity and “beneficiary pays” principles. The subsidiarity principle states that action (or solutions) should be done at the closest possible organizational unit and not subsumed by a higher authority. Rather, the higher authority should play a subsidiary role in helping the closer unit perform its task (the solution).

The “beneficiary pays” principle is easier to understand but in the case of a mass rail system it must be expanded to other beneficiaries beyond the commuter. Who are the beneficiaries? We must include indirect but substantial beneficiaries such as: developers & enterprises within the infra impact area. They are now outside the box, and the solution is to bring them in through a new instrument linked to the LGU permitting process for developmental, building and business permits. The idea is for the LGU’s that are traversed by the transport system to issue “area development certificates” that are given to the funder of the transport system and thereafter require the redemption by developers and business owners of these certificates as another requirement in the permitting process. (Those within the impact area but are neither developers nor business owners would have no such requirement as they are not “beneficiaries” as of that moment).

As for the subsidiarity principle, the certificates in effect bring in the organizations closest to the mass transit system into the equation: private funders, private developers, private businesses and the local government units that are traversed by the system, as well as the NCR as a region. We do not need to involve the national government that ends up with a solution that is not fair to taxpayers and results in a non-working system (long waiting times due to inadequate number of trains).

Developers and business owners benefit from a mass transit system as land values improve for the former, and for the latter more customers and less tired, more productive employees become a reality. Will the redemption of certificates become such a burden so as to reduce investments by the private sector? That would depend on the calibration of funding required, total impact area, and number of certificates issued. In the case of the Metro Mass Transport Rail system it is envisioned that a P300 billion investment to make it a working system from Norzagaray, Bulacan to Dasmarinas City in Cavite can easily be carried by the huge urban development potential if access and commuting can be improved.

In effect, the funder of the transport system has a nice balance sheet after spending for the infrastructure: on the asset side it has the LGU-issued permit-linked certificates, and on the liability side it has the loan or equity it used to finance the infrastructure. The funder now only has to charge the commuter or the user of the transport system the fare that will pay for operations and management of the system, but all capital recovery and profit (ordinary and windfall) is captured by the funder through the area development certificates.

Thus, we have an equitable situation where developers and businesses within the impact area who gain a windfall from better access to their projects share in the funding through the redemption of the certificates.

The author has worked out much of the details to implement this concept and would like to interest government, national and local, and private investors to give it a try in the interest of equity and development of our congested, polluted urban environment.

[Philip Camara is the convenor of Subsidiarity Movement International.] –PHILIP CAMARA, Manila Times