MRT-3 acquisition in peril

BusinessWorld reported today that the government's buyout of the MRT-3 faces possible delays when the Development Bank of the Philippines and Land Bank of the Philippines expressed doubts about the purchase and sought an exit strategy. The government intends to buyout the MRTC from its build-operate-transfer contract, which is set to expire in 2025.

At a cost ranging between PhP11 and PhP14, the MRT-3 probably has the lowest cost in any urban rail-based mass transport in the whole world. This is unconfirmed, of course, but the possible exaggeration is far more real when one considers the estimated cost per person for a single trip: it is a lot more than PhP60.

When the MRT-3 first operated in 1998, it charged upwards of PhP20 for even the shortest trip. But the government decided to subsidize the costs of its operation: at least PhP45 for each single commuter. 

Although Pedestrian Pinoy has earlier expressed the opinion that public infrastructure should strike a balance between profit and service, to operate a facility, even one that provides great service to the people, at a huge loss of the scale of MRT-3 (imagine an average loss of PhP18,000,000 every day), is not sound policy. As a result, the MRT-3's maintenance has suffered greatly, and the acquisition of new trains has been derailed. Service should be done in a manner that does no further harm, nor gives no further inconvenience, to the public that should benefit, and not suffer.

The greater good vs. local autonomy

Below is the editorial of today's issue of the Business Mirror, which also reflects the opinion expressed yesterday in the blog.

The MRT Conundrum

MANDALUYONG Mayor Benjamin Abalos Jr. may have scored political points with
his 300,000 constituents when he decided to take on the Metro Rail Transit Corp.
(MRTC). And, he has a valid point in criticizing the national government for
undertaking, in the agreement covering the MRT, to pay the local taxes for a
private consortium, only to say later that it has no intention of doing so.
However, the millions of other residents of the capital region—of which
Mandaluyong is but a tiny slice—are not amused by his move.

MRTC operates the Metro Rail Transit System, popularly known as the MRT,
Metrostar Express or Metrostar, which has a single line, MRT-3 or the Blue Line.
MRTC is a private company operating in partnership with the Department of
Transportation and Communications under a build-lease-transfer (BLT)
agreement.

A judge—from Mandaluyong, naturally—has been persuaded by the mayor’s
argument that MRTC owes his city some P2 billion in real-estate taxes. The levy
pertains to three MRT-3 stations located near the intersections of Ortigas, Shaw
and Boni avenues.

The local authorities of two other cities have sought to dun MRTC for
building train stops in their jurisdictions. The bid of Quezon City to exact
toll on the commuter-train operator has been dismissed, while that of Makati is
still pending. It is only in Mandaluyong—so far—that the attempt by local
officials to get their piece of the pie from a key national infrastructure has
met judicial success.

With MRT-3 passenger volume topping 500,000 on weekdays, Abalos might have
been led to believe that the commuter line’s operators must be raking in
megaprofits. In fact, thanks to complications in the company’s BLT arrangement
with the national government, MRTC is not even able to generate enough revenue
to expand its fleet of coaches. Despite the spike in ridership as a result of
skyrocketing fuel prices in the past few months, the commuter-train line only
manages to continue running because of state-guaranteed earnings.

When first conceived in the early 1990s, the MRT-3 was envisioned to
decongest the perennially heavy traffic on Metro Manila’s main artery, Epifanio
de los Santos Avenue (Edsa). Although Edsa still looks like a long, winding
parking lot far too often, the train has become a welcome alternative to
hundreds of thousands of commuters who need to get from the northeastern part of
Metro Manila to points further south and west of the capital region and vice
versa in a hurry. The MRT-3 passes through not just Mandaluyong, but also Pasay,
Makati, San Juan and Quezon City.

Like its predecessor, the Light Rail Transit 1 that runs from Baclaran to
Monumento, and the newer line stretching from Marikina to C. M. Recto Avenue in
Manila, the MRT-3 is a key component of a grand mass-transport system that Metro
Manilans have been demanding for decades. Work has begun on yet another line
that would connect San Jose del Monte in Bulacan to North Avenue in Quezon City.

It’s hard to imagine the chaos that would ensue if the legal theory that
underpinned the Mandaluyong judge’s decision affirming Mandaluyong City’s power
not only to impose real-estate taxes on the MRT-3, but also to seize the three
stations located in the city were applied to the other commuter-train lines, as
well as to civil works like the North and South Luzon Expressways, Skyway and
the Coastal Road toll way.

Dozens of city, town, provincial and even barangay officials might be tempted
to exercise virtually feudal rights over national infrastructure.

Local executives like Mayor Abalos ought to appreciate projects like the
MRT-3 not as another opportunity to raise funds, but as a boon to their
constituents and, just as important, an incentive to do business in their
localities.

MRT riders face dilemma

While the DOTC, the MRT Corp. and the city government of Mandaluyong lock horns on the issue involving the unpaid realty taxes involving MRT-3's stations in Ortigas, Shaw Boulevard and Boni Avenue, the daily commuter, who already suffers from insufferably long queues and packed trains that sometimes fail, may soon have to bear an even bigger burden.

Business Mirror reported yesterday that MRTC general manager Roberto Lastimoso threatened to cut the MRT-3's trips from North EDSA only to Santolan, and from Taft up until Guadalupe, should Mandaluyong City make good on its bid to wrest ownership of the aforesaid stations, following the writ of possession awarded to the city government by the Regional Trial Court of Mandaluyong City.

The arguments by each of the parties may be summarized as follows:

• MRTC - under our contract with the Republic of the Philippines, represented by the DOTC, we were only going to build the overhead railway and the stations, and the DOTC would operate it and pay us monthly rent.
• DOTC - we're a government agency exempt from paying realty taxes.
• Mandaluyong City Government - we're not taxing the DOTC; we're taxing the MRTC, and all those small firms which own commercial establishments and have put up billboards in the stations within our jurisdiction.

The issues are not new. In previous years, similar mass-based transport facilities have been levied realty taxes by city governments. Parañaque City once sought to hold a public auction to sell the portions of the NAIA in its territory. Of course then Mayor Joey Marquez was shut up by the Supreme Court. Pedestrian Pinoy thinks that the city government of Mandaluyong should take a huge step back and rethink its strategy with regard to taxing the MRT-3 and taking over 3 of its stations. The concessions given to the MRTC were designed to be particularly attractive because the government could not itself undertake to build the railway, despite having the mandate to do so. And the concessions are legal (though they may not necessarily be advantageous, such as the sovereign guarantee). If private corporations involved in the construction and operation of public infrastructure were to be put at the mercy of city "kingdoms" who think themselves outside of the collective efforts at improving the economy, then the people -- who would be left expecting too much from a national government that has little will, and even less resources, to undertake big-ticket projects -- would only have their huge expectations dashed.

MRT-3 to borrow trains from the LRTA

The Business Mirror reported yesterday that the DOTC intends to borrow 40 trains from the LRTA to fill up the shortage of the MRT-3. This option is being explored because according to DOTC Secretary Leandro Mendoza, the cost of new coaches is prohibitive, and that delivery of newly-purchased trains would take time. 

Now Pedestrian Pinoy is not sufficiently informed of the precise dimensions of the trains of either the LRT-1 or that of the MRT-3, and despite the similarities -- they both run on rails and are powered by overhead cables -- based on experience, the design and size of these carriages are not even remotely alike. Take a look at these photos of the interior of the trains:

Secretary Mendoza admits this when he said that the LRT-1 coaches need to be converted to fit the MRT-3 tracks. "The LRT cars are slightly different from the MRT-3 coaches." Perhaps Secretary Mendoza's knowledge of the our elevated railways isn't so different from that of Pedestrian Pinoy's.

Nevertheless, this proposal begs further questions: will the MRT-3 borrow LRT-1's new coaches? Or the vintage, pre-1990s trains? Also, does the LRT-1 enjoy such a huge surplus of trains that it is actually in a position to lend its cars to the MRT-3? 

Barely a decade into full operation, the MRT-3 has breached its riding capacity. It is the usual story of many of our mass-based transport facilities: the absolute lack of foresight and incredible if not ill-advised cutbacks (whether as a result of extraordinary inflation or illegal kickbacks) have affected design and possibilities for future growth and redevelopment. The options that are now being explored to address the manifold of problems besetting the MRT Corp. are, at the very least, disconcerting. In the end, it is the riding public that suffers as a result of the government's incompetence and the private sector's failures.