Public vs. private is somewhat of a red herring - the private companies were in the red, also, in the 1960s. It didn't start in 1969, is started in 1952 when General Motors deliberately started undermining the streetcar system, and continued in 1957 with the creation of the Interstate Highway system, which made personal autos more convenient than busses. The subsequent increase in sales, and then production started a cycle of declining automobile costs until literally EVERYONE could afford a car. As the user car market has grown, so mass transit has declined, in all markets - not just Portland.

I agree that busses make more sense than light rail, for the reasons that you describe. They'd make even more sense if we electrified the bus lines, since the cost of liquid fuels isn't going down soon, if ever.