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Thread: Profitable public transportation

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    Profitable public transportation

    I was reading the comments posted about a trolley line in Washington D.C. in the washington post, (something I usually don't do because comments in most online newspapers are pretty ridiculous) and many readers wrote that there isn't a single profitable public transit system in the U.S. Does anyoe know of one? I know that the monorail in Seattle turned a quick and hefty profit when it was first built, but have no clue if it is still the case.

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    Cyburbian DetroitPlanner's avatar
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    Transit is used to accomplish many goals. It helps ease congestion, improve air quality, provide accessibility and independance for the poor, keeps drunks off the road, provides the ability for those who have physical impairments to be more productive, and aids in economic development (particularly in dense cities).

    Conversely it is very expensive to operate. The cost of a low-floor hybrid alt biodiesel bus can run upwards of a half million. The costs for operating a passenger train even on an existing rail line can be expensive. In addition, many railroads are not receptive to passenger rail because they are in the frieght moving business and see passengers as competition for its main product. Fuel, wear and tear on vehicles, roads, rails, wages all need to be considered when evaluating if transit makes money. Privately run systems rely on roads paid for by the taxpayer, while publicly run systems may rely on publicly funded or in the case of rail privately funded infrastructure.

    Depending upon how you measure its benefits it can be cost effective or it can be an expensive boondoggle. It is probably more important to look at who is saying that it is not or it is cost-effective and ask why. See if you can get ahold of thier methodology and determine it for yourself.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

  3. #3
    Cyburbian TexanOkie's avatar
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    Quote Originally posted by DetroitPlanner View post
    Transit is used to accomplish many goals. It helps ease congestion, improve air quality, provide accessibility and independance for the poor, keeps drunks off the road, provides the ability for those who have physical impairments to be more productive, and aids in economic development (particularly in dense cities).

    Conversely it is very expensive to operate. The cost of a low-floor hybrid alt biodiesel bus can run upwards of a half million. The costs for operating a passenger train even on an existing rail line can be expensive. In addition, many railroads are not receptive to passenger rail because they are in the frieght moving business and see passengers as competition for its main product. Fuel, wear and tear on vehicles, roads, rails, wages all need to be considered when evaluating if transit makes money. Privately run systems rely on roads paid for by the taxpayer, while publicly run systems may rely on publicly funded or in the case of rail privately funded infrastructure.

    Depending upon how you measure its benefits it can be cost effective or it can be an expensive boondoggle. It is probably more important to look at who is saying that it is not or it is cost-effective and ask why. See if you can get ahold of thier methodology and determine it for yourself.
    I think it's much less complicated than that, because many of the subsidies you look at are shared by all, not just the transit companies. I think Baltimore79 was really just asking whether whether any transit systems receive more revenue than they spend on operating and other opportunity costs - things largely under their control.

    P.S. I do not know of any. Most planners and transit activists will argue that the social and political (and sometimes economic) goals of having an effective transit system outweigh any potential costs.

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    Cyburbian Cloverhill's avatar
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    The BT

    When I was a student at Virginia Tech the rumor was that the Blacksburg Transit system broke even or made money, but only because each student paid a fee for the bus along with their tuition. The rumor also claimed that this was the only 'profitable' system on the east coast, but I have no stats to back that up. Seems reasonable, though, if 25k students were supporting it.
    No one stood up and yelled, "Socialist Government takeover of science and engineering!" when Neil Armstrong set foot on the moon.

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    Cyburbian JimPlans's avatar
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    I don't know of one in the U.S., though some paratransit and on-demand transit companies are for-proft enterprises. But, these companies don't have fixed schedules or routes, so they aren't transit systems.

    Many Japanese systems make a profit (as in farebox recepits minus operating expenses), but this is due to tax structures, geography, and urban form issues that would be practically impossible to duplicate in the U.S. (Japanese Transit Profitability No Monopoly for Monorails

    One argument that I buy from the Reason Institute crowd is that the lack of profit motive in U.S. public transit drives up costs and limits the drive to open up more areas of farebox income. For example, if transit systems were private (and politically well-organized), I would expect that long ago they would have lobbied for land use exceptions around their lines and station areas to allow for dense development, and they would also lobby against land use and transportaton schemes that supported sprawl as sprawl is their natural enemy. However, because transit organizations are all public entities, they don't have the ability to lobby for themselves. So, we are left with a one-sided lobbying effort that supports sprawl-based development, and does it very well.

    Transit in the U.S. doesn't make money for many reasons. The most important IMHO is the lack of ridership-enhancing land uses around transit stations. If transit systems were utilized in both directions and at more hours in the day, they would bring in much more revenues. Current use schemes of daily one-way commuting with empty vehicles/cars for the rest of the day are a recipie for losing money.

  6. #6
    Maybe transit is profitable in Japan (I doubt those numbers). But is not profitable anyplace else and has never been profitable any place else. At least since beginning of the 20th century. It requires subsidies, whether from tax revenues or student fees.

    There is also no car based system that works without large subsidies. Think of all the gas taxes, local revenues, lost property taxes, free parking etc. that goes into the system.

  7. #7
    Cyburbian TexanOkie's avatar
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    I believe that if public transit was profitable still, it would never have transitioned from private sector dominance to public operation or subsidized dominance (unless there were outlying factors like intense corruption or massive regulation aversion, which would politically necessitate a public takeover).

  8. #8
    Cyburbian
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    Couldn't you also argue that many types of transportation are just expensive? What types of costs does the individual car driver pay per mile of road traveled?

    Car itself
    Maintenance (carwashes and cleaning, oil changes, repairs, bodywork)
    Insurance (for 1 person)
    Gasoline
    Tolls
    Taxes to build infrastructure
    License Plate
    Drivers License
    Vehicle Registration

    That's not even including added costs for not even moving, parking meters, parking permits, accidents, roadside assistance, etc).

    I think mass transit in the US is assumed to be affordable to the user, although taxpayers foot the bill in subsidies. I also consider commercial air travel to be a form of mass transit. No it's not affordable, but it's still far cheaper than flying your own private jet.
    "This is great, honey. What's the crunchy stuff?"
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    Cyburbian DetroitPlanner's avatar
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    Quote Originally posted by TexanOkie View post
    P.S. I do not know of any. Most planners and transit activists will argue that the social and political (and sometimes economic) goals of having an effective transit system outweigh any potential costs.
    This is a great conversation, thanks everyone for adding to it. I would agree with everything you say above, however there are also great forces that think that transit is the antithesis of what govt should be doing. These folks are generally from a populist, libretarian, wealthy, or conservative mindset. There are still many out there like Cox who would poo poo most transit. In my mind it is most important to ask who is doing the assessment of cost effectiveness and why it is being done.

    Jim your points of land use lobbying is a fascinating one.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

  10. #10
    Cyburbian CJC's avatar
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    Quote Originally posted by TexanOkie View post
    I believe that if public transit was profitable still, it would never have transitioned from private sector dominance to public operation or subsidized dominance (unless there were outlying factors like intense corruption or massive regulation aversion, which would politically necessitate a public takeover).
    Under modern day accounting standards, I don't believe most of those private transit operators would have ever been profitable, at least on the transit portion of their business (aside from pre-streetcar transit).

    In the late 1800's through mid-1900's, nearly every transit operator either:

    1. Owned land that they were developing, and building transit was a way of increasing the value of that land.
    2. Owned some type of resort or amusement park and the transit was used as a way to get people there.
    3. Received free or heavily discounted ROW from the local government.

    Number one was by far the most common. The operators ran the lines at a level of revenue that often covered operating expenses, but it rarely covered depreciation. By the time that most streetcar tracks were approaching the end of their useful life, most were folding or being taken over by local governments (or GM). Without counting depreciation, it's really hard to call something profitable, unless the plan all along is to run something until it falls apart and then close up shop.
    Two wrongs don't necessarily make a right, but three lefts do.

  11. #11
    Cyburbian ColoGI's avatar
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    Quote Originally posted by CJC View post
    Under modern day accounting standards, I don't believe most of those private transit operators would have ever been profitable, at least on the transit portion of their business (aside from pre-streetcar transit).

    In the late 1800's through mid-1900's, nearly every transit operator either:

    1. Owned land that they were developing, and building transit was a way of increasing the value of that land.
    2. Owned some type of resort or amusement park and the transit was used as a way to get people there.
    3. Received free or heavily discounted ROW from the local government.
    This is a key point.

    Let us also explicitly state that the POV is very costly as well - if, as above, you count properly - and if the hidden subsidies for fossil fool and the externalities were counted and monetized into the system, this conversation would be quite different. Maybe nonexistent. Oh, and fossil fool companies paid taxes (Exxon paid no US federal income tax last year after making $45B in profit).

  12. #12
    Quote Originally posted by Gotta Speakup View post
    Maybe transit is profitable in Japan (I doubt those numbers). But is not profitable anyplace else and has never been profitable any place else.
    Don't be so quick to dismiss the idea: many transit operators in Asia are vast public corporations which continue to report their profits as plain as day. JR East, JR West, Keio, Keisei, MTR, Odakyu, Tobu, and Tokyu are even components of their respective S&P500-like major stock indexes. (Not only does Hong Kong's subway turn a 45% profit margin just on farebox revenue, but its government-owned roadway competition is underpriced.)

    These companies rely on the 19th century American model -- land development and ancillary activities account for the lion's share of their profits -- scaled up with much higher densities for the 21st century. Indeed, I think that these make for an even better refutation of whiny libertarians: these are countries where the transportation & land use markets are arguably more market-oriented than here, and the result is towers and transit, not sprawl and superhighways.

    My basic take on why transit should receive subsidies while roads should pay more than their share: on balance, roads have external costs and internal benefits, while transit has internal costs and external benefits. Those of us on the "exterior" should balance that equation by paying back transit, and making roads pay.

  13. #13
    Cyburbian
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    Metrolink commuter rail in southern California has had 100% farebox recovery on the San Bernardino Line.

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    Cyburbian
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    Smog is one of the best examples of a negative externality to a two-party transaction (in this case, between an oil supplier and an oil consumer) since everyone can see the pollution and everyone agrees that its cost to society is significant.

    Arguing against subsidizing clean-energy transit in the face of that example is exceedingly difficult because no one discounts the value of clean air.

    Transit, with its high fixed costs, has the potential to become so popular that it forms a virtuous circle that allows for: greater ridership; profits, instead of losses; and, further expansions. In the U.S., though, to achieve that situation, we have to not only invest in higher-quality transit; we also have to combine it with both transit-oriented development and clean-energy car sharing available at each transit station.

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    Cyburbian DetroitPlanner's avatar
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    Quote Originally posted by paytonc View post
    My basic take on why transit should receive subsidies while roads should pay more than their share: on balance, roads have external costs and internal benefits, while transit has internal costs and external benefits. Those of us on the "exterior" should balance that equation by paying back transit, and making roads pay.
    To a certain extent this already happens. The FTA is supported by the gasoline tax paid by motorists. At my state level the gas tax is also used to fund things like the Secatary of State, the Libaries, and Economic Development in addition to transit. So while other parts of govt subsidize transportation, transportation subsidizes other parts of govt. One mode of transportation subsidizes the other, without hardly any mechanisms to transfer funding back.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

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    Cyburbian Luca's avatar
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    When people say 'mass transit' I think we need to differentiate between buses and trains and trams/trolleys.

    Given an existing, well-maintained track (i.e., as obtains for roads/highways), I'm not sure why depreciation plus operating costs of a rail service should necessarily mean a deficit. It would be interesting to see some hard figures. Obviously, if we compare auto/air carriers with 'free' infrastructure and services based on riderwship vs. rail that pays for the infrastructure and under pressure to offer services on a 'need' basis, it's apples and oranges.

    The externalities issue is a germane one, as is the vicious/virtuous circle one.
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    Cyburbian wahday's avatar
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    I think a number of posts have gotten at this issue, but to me, the key issue here is defining what "costs" need to be "paid for" by transit. If we take the case of the airlines (who are struggling to turn profits) and in addition to having them cover the costs of employees and their fleets, ALSO asked them to build and maintain all of the airports as well, they wouldn't stand a chance of turning a profit.

    Similarly, if the auto industry were to build not only the cars, but the road system as well, they would be so expensive, very few could afford them.

    Municipal or regional public transit systems are government run and as such take on all the costs of creating the infrastructure, maintaining the vehicles, paying the employees and keeping the cost per user at a level that will inspire them to actually use it.

    In this picture, expecting transit to pay for itself and turn a profit is perhaps unrealistic. I wonder, though, if some of these burdens were removed from the operating budget (track building maintenance, for example) if the picture would change. And, as others have pointed out, there are other cost benefits to transit systems that save municipalities money in other areas. Fewer cars on the road means savings in the frequency of road repairs, for example, or health problems related to pollution (or the financial costs of pollution - the Feds do require that cities take action on areas that exceed a set level of air pollution or risk DOT funding losses, for example). These are areas that are all externalized in the case of the car and the airlines.
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  18. #18
    Quote Originally posted by DetroitPlanner View post
    To a certain extent this already happens. The FTA is supported by the gasoline tax paid by motorists. At my state level the gas tax is also used to fund things like the Secatary of State, the Libaries, and Economic Development in addition to transit. So while other parts of govt subsidize transportation, transportation subsidizes other parts of govt. One mode of transportation subsidizes the other, without hardly any mechanisms to transfer funding back.
    Saying nothing about Michigan. National data from the US DOT for 2005 says:

    About $114 billion is collected from gas taxes and tolls (Feds, states, local). About $21 billion is spent on transit and non-highway uses. Leaving about $90b for roads.

    Total expenditures were $154b for highway related uses. The difference is made up from bonds, general revenues, etc.

    Note this is for highways only. It says nothing about local streets.

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    Cyburbian DetroitPlanner's avatar
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    [QUOTE=Gotta Speakup;537040]Total expenditures were $154b for highway related uses. The difference is made up from bonds, general revenues, etc.[QUOTE]

    Bonds can be a double-dip. Most transportation bonds are issued because they are supported by gas tax revenues. Relying too much on bonding will dig a transportation agency into a huge hole. The understanding of bonds is also part of the whole issue of what are transportation's real costs and how to we measure cost-effectiveness?

    Transit uses a combination of both public and private infrastructure. If a passenger train uses a privately owned railroad, there may be additional costs borne by the owner of the railroad besides just wear and tear; there is a lost opportunity cost of using that railroad for the movement of goods. It is in the best interest of the transit providers that roads are also in good condition because rough or congested roadways will lead to busses being less cost effective; and buses are clearly an inegral part of transit systems. In many areas there is nothing but buses for transit. Providing good roadways will increase ridership on transit and make it more cost effective, but the costs associated with the roadway is hardly considered when looking at whether a transit system is cost effective.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

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    Cyburbian Luca's avatar
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    Quote Originally posted by Gotta Speakup View post
    Note this is for highways only. It says nothing about local streets.
    I broadly agree but do bear in midn that insofar as you can't build a railhead within every single neighborhood, (and even then) you sitll need the local streets. think of local streets (as opposed to interstates, railroads, aiports, etc.) as infrastructure you need to ahve no matter what the means of transportation over regional / national distances.
    Life and death of great pattern languages

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    Cyburbian safege's avatar
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    All transportation will soon be automated. The political "win-win" of good jobs being created in any part of transportation is a myth. A political posturing tactic that we should not be buying... but we do.
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    Cyburbian TerraSapient's avatar
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    I would be shocked if the The Bus in the City and County of Honolulu did not at the very least break even. I suspect it turns a small profit. Most of the time, it is standing room only. I am a frequent rider and spend most of my trips standing or giving up my seat for elderly or child passengers.

    However, they also use the transit system as the school bus system, which decreases the amount the county must pay for school transportation, and probably saves them a ton of cash each year.

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    Cyburbian Luca's avatar
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    Quote Originally posted by safege View post
    All transportation will soon be automated. The political "win-win" of good jobs being created in any part of transportation is a myth. A political posturing tactic that we should not be buying... but we do.
    While I'm aware of trains/trams/subways with completely segregated tracks being potentially automated (For instance, here in London the Docklands Light Railway), I don't see how with current and foreseeable technology buses or street-level trams can be automated.

    And that's just the drivers. You need SOME ticket inspectors, maintenance guys, etc.
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    Cyburbian safege's avatar
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    Quote Originally posted by Luca View post
    While I'm aware of trains/trams/subways with completely segregated tracks being potentially automated (For instance, here in London the Docklands Light Railway), I don't see how with current and foreseeable technology buses or street-level trams can be automated.

    And that's just the drivers. You need SOME ticket inspectors, maintenance guys, etc.
    True. Many things can't be upgraded.

    They will be obsolete.

    Actually, tickets will be obsolete as well. I have a card I recharge when I need to.
    Psychotics are consistently inconsistent. The essence of sanity is to be inconsistently inconsistent.
    -Larry Wall

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    Cyburbian DetroitPlanner's avatar
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    Quote Originally posted by Luca View post
    While I'm aware of trains/trams/subways with completely segregated tracks being potentially automated (For instance, here in London the Docklands Light Railway), I don't see how with current and foreseeable technology buses or street-level trams can be automated.

    And that's just the drivers. You need SOME ticket inspectors, maintenance guys, etc.
    Detroit's grade separated transit trains have been fully automated for 25 years now. They are still a money pit. Only personell are those that watch the cameras, provide maintenance, and occasionally empty the tokens machines.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

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