Is the Montreal Metro Profitable? (2017)
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If you look at a system like BART or the New York subway system, the system provides value for the whole of the city and so everyone, notably employers, should pay for it.
I think Strong Towns were the ones who noted that transit system expected to "pull their weight" get cut in every budget crunch and finally being gutted to total uselessness.
It should simply be expected a public transit should be paid from state in one form or another.
When I commuted from Mountain View to the financial district, it was cheaper to drive by myself than to take public transit including the lifetime cost of my car. (not to mention being immensely more pleasant)
I simply do not get the economics of public transit losing so much money.
I get that I'm not paying myself a salary to drive the vehicle and that the roads I drive on are "free" and the railroad track isn't... but still one would expect the efficiency of rail and economies of scale to make up for this.
Instead BART costs hundreds of millions of dollars per year more than received fares.
I just don't understand.
(edited to add TCO considerations)
1. They attract a section of population to the region who prefer public transit which in turn leads to more business.
2. A string of businesses spring up in/around intermediate stations. Then you have service businesses that support those; like restaurant etc.,
3. It creates employment for thousands.
4. Cost savings w.r.t. parking space, reduced accidents etc.,
5. It makes car ownership that much less of a requirement for jobs in the city.
This is what I noticed in Amsterdam, Netherlands where car commute is considered almost as a last resort. Obviously there are other things that need to fall in place to make public transit work but I believe it on its own is quite beneficial.
From the view point of an individual I don't doubt that economically car commute is perhaps cheaper than mass-transit, but I don't think think that's the goal of a public transit. The benefit to the society is at an aggregate direct and indirect.
Unfortunately, that often means it becomes a subsidy for the already wealthy. Not only are mass-transit systems more likely to be built in already wealthy areas, commercial and residential, (at least before other areas) it also increases land value.
This leads to the true problem of non-state supplied transit, if a transit system truly has to bear its own cost then people - even wealthy ones - are far less likely to use it and will move to cheaper forms of transport like car, or you end up with a transit system for those who can afford it.
Then you'll have the circular argument begin again about the need for affordable mass-transit, and so the only way to get it built is to get the state to pay for it and we end up with a better system overall but also an inequity in the system. You could say it was verging on corruption.
This is why I would advocate a land value tax, as it attacks both parts of the problem, not just one favoured by statists.
As someone of a more libertarian bent (and an admirer of Georgism), I do rankle somewhat at the implication exposed via the non-payment of tax, that the state in truth owns your land because they can kick you off, but everything has a trade off.
Edit: typo
Not necessary. I know of several examples where wealthy areas actively blocked mass transit because they only see it as a way to introduce poor people into their neighborhood.
>This leads to the true problem of non-state supplied transit, if a transit system truly has to bear its own cost then people - even wealthy ones - are far less likely to use it and will move to cheaper forms of transport like car, or you end up with a transit system for those who can afford it
If every transit system has to pay for all externalities then cars will not end up being cheaper than mass transit. Subsidy of mass transit is a way to correct for that.
>As someone of a more libertarian bent (and an admirer of Georgism), I do rankle somewhat at the implication exposed via the non-payment of tax, that the state in truth owns your land because they can kick you off
I really don't see the link between the state being able kick you off and paying taxes, nor do I see the relevance. The state being able to kick you of your land is a necessity for an effective government. How else would they be able to get anything build?
I don't disagree, which is why I wrote "often" and not "always".
> If every transit system has to pay for all externalities then cars will not end up being cheaper than mass transit.
It would be interesting to know where all these externalities are currently paid for, who pays them, and how they got them to be paid, because as far as I know there is nowhere this is case and that means we're comparing an ideal - a possibly unobtainable ideal - against other things like land value tax that have been implemented.
> Subsidy of mass transit is a way to correct for that.
Or - and it would seem more consistent with the argument you just gave - not subsidising the other transit systems such as cars.
> I really don't see the link between the state being able kick you off and paying taxes
Because under other systems of tax the government does not have nearly as direct a say in whether you get to stay on your land. LVT makes them a kind of landlord.
> How else would they be able to get anything build?
They could purchase the land off you like anyone else, and you could refuse them as you might to anyone else. Why are you making government a special case when buying land?
That is also possible, but probably impossible to get through in any country. Subsidy of other transit systems is a lot easier.
> They could purchase the land off you like anyone else, and you could refuse them as you might to anyone else. Why are you making government a special case when buying land?
Because the government is not just a person but represents everyone. You could never build a railway, airport, subway, etc. if all it takes is one person refusing to budge.
Forgive me for giving a slight chuckle that, as a cynic and (somewhat) libertarian, and simply as someone who's been around a while.
More seriously, government has been shown repeatedly not to represent everyone, and certainly not everyone equally. Is evidence required for a statement like that? No, we don't need it because you have already provided it:
> That is also possible, but probably impossible to get through in any country. Subsidy of other transit systems is a lot easier.
It's a lot easier because of the nature of government. I assume you're in tech - is the better system the one where you do less or the one where allocate resources because one system got too many so you add more to another to balance them out?
There are companies doing that, I'd call them dysfunctional. It's also a sign they're wasteful and have too much money. Again, I'm not going to be convinced of the "government is good" argument if that's the pill I need to swallow.
> You could never build a railway, airport, subway, etc. if all it takes is one person refusing to budge.
This is not true. Even if we take NIMBYism as a perjorative, there's plenty of it about and yet things still get built. There are even NIMBYs in China[0][1]. Are you really going to claim that things don't get built quickly there? When you talk about getting things done via government and steamrollering over the property rights of people, I tend to think of China's government but I could take where I'm from as an example. In the UK, the government wants to build a new high speed rail network[2] - no one, aside from them and the people who will make money from it, seems to want it. Still they press ahead, destroying ancient woodland[3], graves[4], and people[5] as they go.
> All is being cast aside to make way for HS2’s new railway terminal at Euston to be designed by Fitzrovia firm Arup who along with other mega corporations will do very nicely from the multi-million pound contracts.
But hey, who cares about property rights and the environment, right? Who cares that this mass-transit system is being used to prop up property prices in London (along with other subsidies[6]) and will displace lower paid workers even further from their place of work?
I have an alternative idea:
- no housing benefit - no high speed rail
because then low paid workers can't afford London. Bad for them right? No, bad for them and the businesses that require them. They'll either have to pay more - which is good for the workers - or move to cheaper areas, thus creating better paid jobs or jobs where they're needed more - again, good for the workers.
And, since government is "for everyone", all of us could enjoy a tax cut, more income equality, and better land use (i.e. lower density housing, less crime, easier commute, closer to countryside…)
[0] https://edition.cnn.com/2015/05/19/asia/gallery/china-nail-h... "China's 'nail houses': The homeowners who refused to budge"
[1] https://chinadialogue.net/en/pollution/6051-china-s-nimby-pr... "China’s ‘nimby’ protests sign of unequal society"
[2] https://apnews.com/5712b97df48434446dbf0fc3048a3f5c "UK’s Johnson backs high speed railway despite opposition"
[3] https://www.telegraph.co.uk/news/uknews/road-and-rail-transp... "HS2: 50 ancient woods 'under threat'"
[4] https://www.mylondon.news/news/zone-1-news/50000-dead-london... "50,000 dead Londoners to be moved to a new graveyard in Surrey because of HS2"
[5] https://fitzrovianews.com/2019/05/07/demolition-theatre-how-... "Demolition theatre: how HS2 is displacing the living and disturbing the dead"
[6] https://www.bbc.co.uk/programmes/b06bnbpx "What's Housing Benefit For?"
True, it's far for perfect. But what you're suggesting is simply delusional.
>It's a lot easier because of the nature of government. I assume you're in tech - is the better system the one where you do less or the one where allocate resources because one system got too many so you add more to another to balance them out?
It's not a technical issue. There's just no way that's going through parliament and Subsidy of mass transit is happening right now.
>This is not true. Even if we take NIMBYism as a perjorative, there's plenty of it about and yet things still get built. There are even NIMBYs in China[0][1]. Are you really going to claim that things don't get built quickly there?
I don't see how that proves your point, China is basically the opposite of what you want. If someone doesn't want to sell the government simply sends thugs/the police to deal with them.
>When you talk about getting things done via government and steamrollering over the property rights of people, I tend to think of China's government but I could take where I'm from as an example.
The difference is that China is not a democracy and does not have separation of powers. Yes, our democracies are far from perfect but it's the best thing we have to protect the poor from the rich. Doing away with it is just going to give the rich even more power over the poor.
After calling me "delusional" I'll not feel as bad pointing out that if you can't understand why I've included in my argument something that is "basically the opposite of what you want" then you haven't understood my argument at all.
Perhaps try reading it again and, instead of taking issue with it prematurely, try to understand it first. That's probably a good general guideline for you.
I'm out.
https://asia.nikkei.com/Business/Transportation/Tokyo-Metro-...
"The company recorded a net profit of 61 billion yen ($560 million) for the year ended March, up 0.6% from the previous year thanks to external factors such as the increase in foreign visitors to the Japanese capital. It posted revenues of 435 billion yen."
I don't think there's something fundamentally different about Tokyo compared to other dense metropoles like NYC or London. Low density cities like LA might be a different story.
As others have pointed out, there is. It's about owning the land where you set up your stations. You don't make money on the tickets themselves, you make money by charging rent to companies in highly convenient locations.
Some European cities do this on a smaller scale (like a shop or two right at the station), but nowhere near as much as they do in SE Asia.
But it's still pretty unfair if you think about it: having a subway system is a major plus for a city, so landlords get to collect more rent (generally, and even more if the building has a subway station nearby). So it's only natural to ask them to pay slightly higher taxes to help finance public transportation. But subway systems still have to justify why they are cross-financed using tax money...
But people also want public transport in rural regions and there it is just far way from profitable. But it‘s still necessary to provide IMHO.
That doesn't completely remove the need for public funding, just changes the dynamics so that it is more balanced. It also results in cities that organically grow with mass transit, making it an integral part of the infrastructure rather than an afterthought.
Really, or is it a failure of the western cities to run profitable, efficient and ,eh, clean transport networks. Japan, Hong Kong, Singapore are running private, profitable and efficient metros for a much cheaper fare than what other cities can do.
The reality is that these massive infrastructure projects have turned into huge embezzlement schemes of public funds from different players (politicians, consultants, unions, etc...); and they are holding the public hostage: Otherwise, are you going to stop/disrupt public transportation?
In most other countries that land was sold off and somebody else (e.g. private equity) profits.
Singapore's MRT subway lines are constructed and the assets owned by the Land Transport Authority (LTA), a government entity.
Tokyo Metropolitan Bureau of Transportation (Toei Subway) is owned by the government of Tokyo.
MTR Corporation Limited which runs Hong Kong's Mass Transit Railway (MTR) is a majority state-owned Hong Kong company (75.09%).
https://en.m.wikipedia.org/wiki/Mass_Rapid_Transit_(Singapor...
Singapore loves competition. The public hospitals are, well, public, but were restructured to compete with each other more like private businesses.
This kind of capitalistic short-term thinking over long-term public interest is precisely what is wrong with America today.
Mass transit is almost certainly profitable, if priced correctly. It enables massive value concentration. One could easily introduce a property tax on real estate to fund it. But right now the profiteers managed to argue that it is a "public good". As if square meter prices measured in the tenths of thousands of dollars are in any form normal.
Just to make this crystal clear: No one would build a mass transit system to move around a few tourists or get the inhabitants from their apartments to the latest fancy restaurant. Mass transit exists to fill the city with a workforce it cannot or doesn't want to house properly.
The OP argument 'everyone uses it' is also not super rational argument either on it's face - we all 'use food' and 'water' but we pay for those - the former in market terms, and the later is socialized on some level but still paid for by individuals on a usage basis.
1) You'd be happy to have people in villages and in the countryside pay for your transportation, who wouldn't? It's not fair or ideal, to have some people's tax money pushed heavily into systems that don't benefit them.
2) When things are 'free' we tend to use them in a way that does not reflect their true cost. Imagine if toilet paper were 'free' for everyone. We'd probably use a lot more of it, unnecessarily so.
The issue with metros is the intense capital costs and de facto monopoly status.
If there were 20 metros too choose from we wouldn't even think of socializing them, you'd just have to 'pay for it' literally like everything else.
The 'Strategic Advantage' in the metro is that it's actually a very efficient way to move people, but those efficiencies may not be realizable without subsidy.
So instead of 'free' - a reasonable solution might be to subsidize expansion while requiring regular Ops to be paid for out of revenue. Some investment in urban facilities is warranted vis-a-vis the countryside due to the big upside i.e. a large bit of social/industrial gain can be had by government investment that could not be had otherwise.
I know this is not the case in the US but here, it is common to have public transport on the country side as well to some degree. Most villages have bus transport. Yes, there is a lot more in the city but it grows with density.
> 2) When things are 'free' we tend to use them in a way that does not reflect their true cost. Imagine if toilet paper were 'free' for everyone. We'd probably use a lot more of it, unnecessarily so.
I do not think there is such thing as an excessive/unnecessary use of public transport when the alternative is to use a car which pollutes the planet. I cannot imagine using the tram in cases where it would be unnecessary, but maybe thats just me.
If it is in the interest of the people to get rid of cars, offering public transport at no cost is not so far fetched, considering the amounts of money we will have to spend to combat carbon in the air and are spending on road systems.
I don‘t think it‘s fair to compare running a bus line on pre-existing roads to maintaining and extending a subway network. People living in big cities already have the advantage of better jobs and much better pay, so I think it‘s fair to expect them to pay for their own transport. Those who choose to live or better said not leave the countryside do it by taking a risk of a harder life yet with maybe more satisfaction in some ways. In this context, I think it’s not justifiable to burden them with supporting the city people when it‘s clear they will get zero benefit out of it.
Yet, it is. Both have the same purpose on different scales and environments.
> People living in big cities already have the advantage of better jobs and much better pay
I would argue that this is the case only for some professions, not all. Outside of white-collar work there is little difference in wages, however that is exactly the demographic which would benefit most from this. May it be the bus or the subway, getting around should be possible to all.
As someone who lives in Germany I can say this is extremely innacurate. ALL jobs pay better in large german cities, to account for the higher cost of living.
> May it be the bus or the subway, getting around should be possible to all.
You are spinning this in the wrong direction. I never argued that some people shouldn’t have access to public transport, just that people who stay away from large cities shouldn’t be forced to pay for the comfort and privileges of those living there. I’m sure small rural communities or even medium sized towns and cities can afford to pay for their own bus lines. Living in a large city has its disadvantages, and one of them is cashing out for the train ticket, out of those fat paychecks.
Born and raised here. Pretty sure people being paid minimum wage is a thing both in the city as well as the country side. I would even argue the amount of low-payed jobs is higher in big cities with lots of "disposable" people to do them.
> just that people who stay away from large cities shouldn’t be forced to pay for the comfort and privileges of those living there.
I can say the same for paying taxes for roadwork. I don't need them, still I am paying for them. Especially in Germany, where there is no road tolls and no private roads. The cost of environmental damage also accounts for that.
> Living in a large city has its disadvantages, and one of them is cashing out for the train ticket, out of those fat paychecks.
If you run the numbers you will realise that owning a care here, including repairs, insurance and gas is quite a bit more expensive than getting a subscription for public transport.
--> demand for transportation is absolutely elastic.
There's no doubt there - it's easily demonstrable.
If right now you increased the cost of a tram ticket so that the Subway could break even and make a 5% profit, then usage would drop off quite noticeably.
The difference between a 'market rate' and 'free' is very substantial, and it's a first-order misapplication of resources.
Making stuff 'free' is almost always a bad idea.
I actually do believe that we should invest more in subways, because the net advantages are quite a lot (at least in North America we don't invest enough), but my point is we have to be careful about the logic of social spending.
Supply and Demand, basic Economics don't just magically go away.
Well, you are wrong about what you "know." The US government subsidizes airports, airfare, and other forms of transit to a significant number of rural destinations in the country. If they did not do so, domestic airlines would not fly to these areas because it would not be profitable.
Why do you think this is not the case in the US? Do you just assume the worst about our country? Why?
We often used these busses, just to get around town, and, well, sometimes to get to the shopping center.
Seen isolated, these bus lines were losing money, they made literally no profit, all expense, no ticket sales.
Them being free, however, was not charity, their presence generated so much additional revenue in the respective shopping-centers that it made sense to run them. As far as I understand, they were funded through the rent paid by the shops in the centers. So "transporting customers to your shop location" was included in the rent, neat.
Now, in more taxed countries, like Denmark, a goverment-run model would work as well in more populated areas, as transportation becomes free, people become more mobile, and will travel more often to buy goods, and more sales-taxes result.
Do you think a transportation system that is perversely incented and controlled by 'the shopping mall' to do specific things, subject to all sorts of weird policies ... is going to be more efficient than simply reducing the price of goods and allowing travellers to pay themselves - and decide for themselves where they want to travel and for what purpose?
Getting the capital costs sorted out for these things is hard, the shopping mall would have been one of the few places to foot the initial bill - that's probably why it happened the way it happened.
But it probably would have been more efficient for some state actor to step in and provide the means for it to work more broadly.
So goods were still cheaper in the shopping center than in the stores located in the city-center.
I didn't say this would be the most efficient solution, I just wanted to point out that asking if a transportation infrastructure is profitable, and only looking at it in isolation is silly, because the value it adds to the areas around its stops can highly outweigh the cost of operating it.
This seems like a better route than a blank check "it shouldn't need to be profitable", which, when comparing American public transit to Tokyo's, doesn't seem to actually make service any better.
* build public transportation to reach land
* sell land for higher price due to good access with public transportation
* use profit to pay back loan for building public transportation
There is some city in Asia (I know^^) that uses this playbook very successfully, sadly I can't find the article where I learned about it anymore.
There is too much private anyway when it comes to land-use. Obviously you have to ensure to avoid the common pit-falls of government run (or intervened) companies, but we have decades of knowledge about this now and should be able to design better systems.