MBTA nixes takeover, ponders next rail contract

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MBTA management has ruled out the possibility of taking over direct operation of the state’s commuter rail network. Instead, it may seek a longer-term contract with a private operator to spur investment in an aging system that has become increasingly prone to breakdowns.

Who runs the trains and for how long is undoubtedly of less interest to 70,000 or so daily commuter rail passengers than whether the service is reliable and on time. But the cash-strapped Massachusetts Bay Transportation Authority’s ability to provide consistently reliable service may well hinge on a series of crucial decisions it faces over the next 12-18 months.

Comprised of 394 miles of track stretching from Boston west to Worcester, north to Merrimack Valley and south to Warwick, R.I., the commuter rail system is currently operated by Massachusetts Bay Commuter Rail under a contract with the MBTA that expires June 2013. MBCR has run the system since 2003, initially under a five-year deal that was twice extended for shorter periods.

Future options include a new short-term contract with a private operator in the range of 5-10 years; a longer-term contract of 10-30 years; or having the MBTA itself run commuter rail, as it does buses and subways.

The latter possibility, sometimes called the “public option,” was raised by Lt. Gov. Timothy Murray among others in the aftermath of a harsh winter a year ago. A snowy January 2011 brought 111 system-wide cancellations and 850 hours in delays. In all, fewer than 73 percent of commuter trains arrived on time at their final destinations. The problems were largely blamed on the T’s antiquated fleet of locomotives and exacerbated by winter weather.

In a recent memo to the MBTA’s Board of Directors, acting general manager Jonathan Davis said the public option posed too many risks, adding that “the preferred option is to continue to outsource both operations and maintenance of the commuter rail system.”

The potential risks, spelled out in a report by the consulting firm KPMG and a separate analysis by T’s legal counsel, included sharply higher wages for unionized commuter rail workers who would likely seek parity with higher-paid T workers. For example, the analysis found a typical MBTA machinist earned an hourly wage of $34.24 in 2011, compared to $23.15 for an MBCR machinist.

Further complicating efforts to bring commuter rail operations in-house would be the likely need for legislation to create a separate public rail entity, and an existing state law related to privatization of government services that could well prevent the T from ever returning to the private route should the public option prove a miserable failure.

The consultant did note that the public option would give the MBTA more control over the commuter rail system and might generate some cost savings. It also noted that most other U.S. commuter rail systems were run by the public sector, including large ones such as New Jersey and Philadelphia.

But the report, which did not make specific recommendations, included another key objection to in-house operation: “The MBTA would forego any possibilities for leveraging private investment as part of a new contract approach.”

Many public policy experts see private investment as a key to revitalizing the Massachusetts system.

T officials acknowledge there is little hope for significant public investment anytime soon. Saddled with $5.5 billion in debt from past borrowing and a projected operating deficit of $161 million, the agency this past week proposed a variety of fare hikes and service cuts throughout the mass transit system, including an end to weekend commuter rail service.

“Right now there are limited public funds to capitalize the extensive scope of repairs that are needed,” said Richard Dimino, president and chief executive of A Better City, a business-backed organization that recently outlined infrastructure concerns in its report, “On the Right Track? The Future of the Massachusetts Commuter Rail.”

The report found nearly 70 percent of locomotives and 84 percent of commuter rail coaches were in poor or marginal condition and 75 percent were at or near their 25-year useful life as recommended by manufacturers. A majority of locomotives have been in service since before 1988.

A long-term contract would give a private operator the time needed to leverage capital for new equipment, said Steve Poftak, director of the Center for Better Government at the Pioneer Institute, unlike the original five-year deal with MBCR.

“That’s just too short a time to expect anyone to do capital investment. You kind of get these `neither here nor there’ contracts of that duration,” said Poftak.

“You can’t really ask the private sector to make 30-year investments in capital on a five-year deal,” agreed Dimino.

Dangling a longer contract term might also entice a broader array of bidders, including international transit operators. Yet there are also drawbacks.

Some worry that a longer deal might tie the hands of the MBTA if the private operator doesn’t meet expectations, or raise questions as to who controls the setting of commuter rail fares – the T as it does now or a private operator who’s investing in new equipment.

State Secretary of Transportation Richard Davey believes it’s possible to structure a long-term contract with safeguards.

“It’s not as if you are locked in … if there is an egregious problem or lack of accountability,” said Davey, who added that he had no interest in yielding fare-setting control to a private operator.

The T hopes to settle the contract by the end of 2012 to ensure a smooth transition, though given the complexity of the issues it’s been suggested that another brief extension of the MBCR contract may be necessary.

For its part, MBCR plans to bid aggressively for the next contract and vigorously defends its performance over the past eight years. It announced this week that 92.8 percent of its trains were on time in December, the best mark in 2 1/2 years.

The contractor also said its on-time rate for all of 2011 was 95.1 percent when “factors beyond MBCR’s control” are taken into account.

“A longer term contract that allows private-sector investment by the contractor in the system would allow us to begin to make those investments and allow us to modernize the commuter rail system to meet the demands we are facing,” said MBCR chairman James O’Leary.

Also seen in ABC News, CBS News, The Review, The Olympian, and Associated Press.