Uber, Lyft “cannibalizing” public transit

Rideshare apps are putting Southern Nevada public transit in a financial free fall that threatens to devastate an already inadequate system, transit officials were told last week.

And for all the political support for Uber and Lyft in Nevada, and despite cultural enthusiasm for technology-based economic “disruption,” there is no guarantee that disruptive companies will be there to pick up the pieces after they’ve decimated public transit, the Southern Nevada Regional Transportation Commission was warned.

In 2018 the RTC saw a revenue of  $237 million while expenses came out to $231 million⁠ — that is a difference of $6 million. The new reality is a major issue for the RTC, which needs revenue to exceed expenses by $14 million in order to have enough cash for bus and route maintenance. 

Over the past three years the gap between transit operation revenue and expenses has been narrowing. Expenses are projected to exceed revenue in 2023. 

“Something has got to change,” Don Snyder, Chair of the RTC’s Transportation Resource Advisory Committee said during a meeting last week. “If the revenue does not change we’ll have no choice but to cut expenses.”

A large part of the problem is on the resort corridor, where there’s been a dramatic decrease in revenue. 

“Our cumulative loss on the Strip in revenue is $20 million dollars so far,” Snyder said. “That has really hurt us. That’s a 29 percent decrease in revenue just on the Strip.”

There was a time when RTC saw a $6 million profit from public transit revenue on the resort corridor, largely driven by tourist dollars — revenue which in turn helped finance public transit throughout the city. 

“This is why the ridership on the Strip is so critical,” Snyder said. “That has been the golden goose and the golden goose is not giving.”

This spring RTC authorized $3.6 million a year to launch a small program to compete with ride share companies on the Strip, even as large swaths of the valley still fall out of RTCs’ limited bus service area.

At the same time, much of the community has been clamoring for an expanded and more efficient transit system, which prompted tentative approval of “rapid bus transit” along Maryland Parkway after a light rail option was rejected because of cost.

The connection between the rise of transportation network companies (TNC’s) like Uber and Lyft since Uber’s Nevada launch in 2015 and the decline of revenue for public mass transit is clear, said Tina Quigley, the RTC’s chief executive officer.

“Historically you could see we’re growing, we’re growing then 2015 comes along and all of a sudden you start to see a decline and it’s not plateauing,” Quigley said.

Las Vegas and other municipalities throughout the country have taken steps to clamp down on ridesharing.

Uber expanded its service into Las Vegas in October 2014. About a month later, a judge ruled the company was prohibited from operating in Nevada, but by 2015 the Nevada Transportation Authority officially gave Uber and Lyft permission to operate in the state.

In 2016, the Las Vegas City Council approved semi-annual business licensing fee. Clark County additionally levies fees for TNC’s on a tiered rate system. TNC drivers in Nevada are required to obtain a TNC permit number decal, Nevada business license, and Clark County business license for drivers in Las Vegas. Still, the quick growth of TNC’s have not been deterred.

“One of the things we looked at this past year is that other markets that have had Uber, Lyft, and other forms of transportation in place for a longer period of time than us, have they actually hit a plateau?” said Guy Hobbs, Managing Director of Hobbs Ong & Associates, who was hired as a consultant with the RTC to identify potential funding sources available for public transit in Southern Nevada.  “We haven’t seen evidence of a plateau in other markets,” meaning RTC revenue will likely continue to fall due to TNC’s.

Sharp declines in revenue for the RTC is nothing new, said Hobbs. During the last recession the RTC froze management pay, cut travel, membership to transit organizations, cut 223,000 hours of fixed route service, retracted the paratransit service area, and eliminated an unlimited monthly pass for paratransit.

Historically, the only real tools the RTC has had to control the deficit is cutting cost and services, including services to the valley’s most vulnerable residents, such as low-income riders dependant on public transit, the elderly and those with disabilities who rely on paratransit. 

The RTC provided 64.4 million rides on fixed route buses in 2018 at a cost of about $110 million and 1.35 million rides on paratransit at a cost of about $44.8 million. The outsized cost of paratransit leaves it vulnerable to cost cuts.

“Talking— as we all have to Legislators about this problem—they don’t want to talk about it. They don’t want to talk about the gas tax which is going away, they don’t want to talk about taxing vehicle miles traveled as a solution,” said consultant Danny Thompson, a member of the RTC’s Transportation Resource Advisory Committee (TRAC). “We have to sound the alarm to these guys.”

“If you look at the gas tax and this problem and then what’s happening nationally with the cutting of any kind of grant that has to do with public transportation, someone better get their hands out of their pants and start looking at the problem,” Thompson said. “Because this is a real problem that’s going to— overnight— become a huge problem when there’s no money to build roads and there’s no money for transit.”

“They put the cab industry out of business, they’re going to put us out of business and then they’re going to go away because their economic model is unsustainable,” said TRAC member Warren Hardy, a former state senator who is president of the Associated Builders and Contractors.

Uber Technologies Inc. recently reported a record $5.2 billion loss in the second quarter, its largest quarterly loss ever. The ride-share giant has yet to make a profit since its founding.

“Listen, I’m a capitalist— survival of the fittest,” Hardy said. “But they’re not competing they’re cannibalizing.” 

“They have a business model designed to eliminate competition and they’re doing it effectively but it’s not a sustainable long term business model. Nobody talks about it. We just ring our hands while everyone is being put out of business. We need to start planning for the day,” Hardy said, when current transit options “no longer exists or the prices go up dramatically.”

“At the Legislature they’ve been nibbling around the edges of this question about how to deal with TNC’s,” Hardy said. “But nobody’s come forward with a concrete solution. So what we always end up with at the Legislature is a conversation about how we need to do an interim study.”

Should Strip route revenue continues to free-fall, which looks increasingly likely, RTC has authority from the Legislature to seek a sales tax increase via ballot initiative by 2024.