BUS SYSTEM MAY IMPROVE, BUT AT WHAT COST?

Everybody says Columbia and SCANA have negotiated a “win-win” agreement on the city bus system. But is it truly 50-50?

Since 1931, Columbia has had a sweetheart deal to cover the costs of its transit system, a deal unique in the nation. We’re about to lose our old sweetheart. We’re about to gain a new tax. Any good news? Yes, but go back a hundred years, because history possibly has something to do with where we’re headed in both transit and electric power.

Not long before 1900, Edison dropped his DC network and shifted to Westinghouse’s AC systems, sold his interests in what became General Electric and watched J.P. Morgan and a few others consolidate the electric utility industry up North.

Cities down South wondered how in the world they could capitalize electric power systems and play catch-up with the industrial North. Soon the idea of an assured return for shareholders surfaced. A predictable and reliable return on common equity supported by the state regulatory commission could practically guarantee investment.

Targeted at 12 percent, the return would be paid entirely by the utility’s customers. That assurance could attract tons of money for infrastructure to generate and distribute electricity.

The concept survives. The S.C. Public Service Commission adjusts the price of electricity to allow SCANA to make a 12 percent return on common equity. If there’s a 13 percent return one year, lower the rates to achieve just 12 percent. If the return is 11 percent the next year, rates can be raised until the return hits 12 percent. Not each year, but over the long haul, SCANA’s annual report cites roughly 12 percent.

If SCANA CEO Bill Timmerman changes the drapes in his office suite high above Main Street, the price is figured into the accounting of “electric plant-in-service” against which the rates are determined by the Public Service Commission. By law, SCANA cannot lose money.

Now consider the history of Columbia’s transit system.

In 1925 Broad River Power Co. (later SCE&G) acquired its competitor Columbia Railway, Gas and Electric Co., a firm contracted to run Columbia’s streetcars. Transit operations were discontinued in early 1927 because the power company could not find happiness in streetcars. The city claimed its agreement still held, and the U.S. Supreme Court agreed.

Fortunately for both the power company and the city, transit has been considered with the overall costs for generating and distributing electricity throughout the entire utility customer domain. The power company got its 12 percent return while the ratepayers kept the city free from transit budgets. Soon to end, that romance is still strong, according to SCANA’s last 10 annual reports to its shareholders. Think about it: SCANA customers in Beaufort and Bowman and Blaney indirectly subsidize the transit riders in Columbia. Come August when the bus transfer occurs, we may begin to see some improvement, but it’s sure to cost, big time.

Columbia is not saying how it plans to pay for the buses. Austin, Texas, another capital city with a flagship university, pays a 1-cent sales tax for transit. Three-fourths goes to run the bus system on an $80 million budget. Here, we try to ride our buses for $7 million.

In smart business circles, expansion of a money loser makes little sense. But we absolutely must achieve acceptable access to an adequate bus system, and that’s why a dedicated tax to support transit is looming.

How much? Most transit service populations kick in about $20 per resident. Columbia’s transit service area covers 350,000 people, which comes to $7 million. That’s enough to cover the current bus system and expand once we have a realistic fare along with a full federal subsidy, two sticking points SCANA never managed – never had to.

Finally, the good news: Thanks to the transit management skills of Columbia City Council, the quality of the bus service will improve. It has to. You have the vote.

Mr. Ligon, a Columbia businessman and founding principal of Affinity, lectures on cities at the Columbia Art Museum every second Friday at noon.

January 12, 2002  State (published as The State)  Columbia, South Carolina
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