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EQUITABLE MRT/LRT FARES THROUGH OUT-OF-THE-BOXSOLUTIONS

Philip Camara, Convenor, Subsidiarity Movement Int l., July 31, 2010 (Philip.camara@gmail.com)

The critical role that a working mass transit plays in urban development isobvious. A working mass transit system is one that can get a commuter to theirpoint of exit within 30 minutes from entry into the system s gates. Our MRT / LRTsystems currently fail this test during rush hours what with the lack of trains forthe volume of commuters. The long lines at times extend all the way to the streetduring 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 anydegree 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 tax payer where even those as far awayas 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 buya system that loses about P7 billion a year (just the MRT line)?

Out-of-the-box-solution

So, we have 2 problems: a) subsidy for the current operations that the nationalgovernment can ill afford, and b) expanding the system so that it conforms withthe definition of a working mass rail transit system.

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My solution would use two principles: the Subsidiarity and beneficiary paysprinciples. The Subsidiarity Principle states that action (or solutions) should bedone at the closest possible organizational unit and not subsumed by a higherauthority. Rather, the higher authority should play a subsidiary role in helping thecloser unit perform it s task (the solution).

The beneficiary pays principle is easier to understand but in the case of a massrail system it must be expanded to other beneficiaries beyond the commuter.Who are the beneficiaries? We must include indirect but substantial beneficiariessuch as: developers & enterprises within the infra impact area. They are nowoutside the box, and the solution is to bring them in through a new instrumentlinked to the LGU permitting process for developmental, building and businesspermits. The idea is for the LGU s that are transversed by the transport system toissue area development certificates that are given to the funder of the transportsystem and thereafter require the redemption by developers and businessowners of these certificates as another requirement in the permitting process.(Those within the impact area but are neither developers nor business ownerswould 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 organizationsclosest to the mass transit system into the equation: private funders, privatedevelopers, private businesses and the Local Government Units that aretransverse by the system, as well as the NCR as a Region. We do not need toinvolve 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 toinadequate number of trains).

Developers and business owners benefit from a mass transit system as landvalues improve for the former, and for the latter more customers and less tired,

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more productive employees become a reality. Will the redemption of certificatesbecome such a burden so as to reduce investments by the private sector? Thatwould depend on the calibration of funding required, total impact area, andnumber of certificates issued. In the case of the Metro Mass Transport Rail systemit is envisioned that a P300 billion investment to make it a working system fromNorzagaray, Bulacan to Dasmarinas City in Cavite can easily be carried by the hugeurban development potential if access and commuting can be improved.

In effect, the funder of the transport system has a nice balance sheet after thespending 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 tofinance the infrastructure. The funder now only has to charge the commuter orthe use of the transport system the fare that will pay for operations andmanagement of the system, but all capital recovery and profit (ordinary andwindfall) 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 thefunding through the redemption of the certificates.

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