Press Release
March 17, 2009

Chiz: MRT 'ghost riders' taking gov't for a ride

Opposition Senator Chiz Escudero on Tuesday said taxpayers are paying for "ghost riders" in the Metro Rail Transit Corp. (MRT) as he backed moves for a government takeover of the light rail firm.

The senator issued the statement in light of frail state of finances of the MRT, which he says "continues to drain the national coffers of much-needed funds."

By his calculations, Escudero said the government subsidy per rider is about P42, computed against the amount of public funds being funneled into the MRT.

"It is like paying for almost three riders more at the current fare rates of the MRT, which on the average is P14 per passenger. The government is paying for riders who are non-existent," Escudero said.

"The MRT has long been bailed out by the government. While its coaches are always full, its coffers are always empty. The national government subsidy is the one that lubricates its operations. This comes as no surprise because the project was financially engineered to be dependent on government aid," he points out.

In this case, the senator said, it would be better for the government to take over MRT.

"If we own it, then let's run it. And let it be a reminder that when it comes to private-public ventures, never again should we end up privatizing profits while debts are nationalized," said Escudero.

He revealed that to pay for the arrears of MRT alone, the government shelled out P2.2 billion in 2007 and 2.45 billion in 2008. He added that this year, it will remit some 1.19 billion for the same purpose.

Escudero also said that the government subsidized MRT operations and maintenance to the tune of P579 million in 2007 and P618 million in 2008, while a total of P645 million is earmarked for this purpose this year.

"If fares are priced to recover costs, you court a commuter revolt. Mass rail transit is a losing proposition. Rents of real estate in stations or depots are supposed to make up for the losses but these have been ceded to private partners. So government ends up picking the tab," he said.

"And MRT is economically viable, meaning it is an important cause in the overall scheme of things. But alone, it is not financially viable if only turnstile or firebox income will be considered."

Escudero noted that the because of the "high guaranteed ridership forecast" of the MRT at its inception, with the shortfall to be shouldered by the government in this railway version of the "take-or-pay provision in the independent power producer (IPP) contracts," the government will be paying for the fares of what are essentially "ghost riders."

"This should serve as a cautionary tale in future light rail projects so ridership won't be inflated," he said.

Escudero said that another cause for the hemorrhage of public funds through the MRT is the cost of its maintenance.

He said that the MRT has a high maintenance contract with a Japanese firm, which is onerous if compared with lower fees the LRTA is paying for the upkeep of its two lines.

"To top it all, MRT debt carries a high 12.5 percent to 15 percent annual interest rate," he explained.

The senator also said the government should refinance the $865-million debt with "low-cost money," a mode that will book savings in the long run.

"But the pricing of obligations should be done transparently and verified by independent appraisers when warranted."

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