Wednesday, August 17, 2011

Our transit system could be profitable like Hong Kong's

Last week I discussed Alex Marshall's take on the profitability of the Hong Kong Mass Transit Railway. As Alon Levy pointed out, the MTR does make an operating profit, so what I said was a little inaccurate. I said "Marshall responded that the Hong Kong MTR makes money on real estate and uses that money to subsidize its transit facilities." What Marshall actually said was that the Hong Kong MTR makes money on real estate and uses that money to supplement the income from its transit facilities. Here's the relevant paragraph from Marshall's blog post:
Hong Kong’s MTR is unusual in also actually making money from its fares as well. How it can do this relates in part the uniqueness of running trains on an intense few strips of land filled with development. But for our purposes it’s worth looking at its actions as a developer, and that as a model for transportation agencies and departments in this country.
Here Marshall acknowledges that the MTR makes an operating profit, but dismisses that as a consequence of "the uniqueness of running trains on an intense few strips of land filled with development," and thus not relevant "for our purposes."

Here I want to disagree with Marshall. I think the urban layout of Hong Kong is not unique for our purposes, and very relevant to the issue. In fact, people thinking only of the United States would say that "running trains on an intense few strips of land filled with development" is a great description of what the New York MTA and Port Authority do.

The development density, though, is only part of the story. It is one source of the MTR's operating profit, but only because it is Step 2 of the Magic Formula for Transit Ridership:

1. Give transit its own right-of-way and good terminals
2. Make it hard to use cars
3. Make it expensive to use cars
4. Profit!

The Mass Transit Railway has its own right-of-way. Hong Kong is one of the fifteen most expensive places to buy gas. And it is hard to drive there. But the density is only part of the reason it's hard to drive. The highways in Hong Kong are relatively few, and relatively narrow. If you're coming from the mainland there are at most fifteen lanes of traffic leading into the city.

New York may not make it quite as hard to use cars, but driving here is notoriously unpleasant and difficult. It is pretty expensive, except for the free bridges and highways, and the free or cheap parking.

What Marshall is neglecting, what too many transit advocates neglect, is the fact that transit is in competition with private cars driving on government-subsidized roads. If the roads are expanded or driving is made cheaper, transit ridership falls; I think we'll see a small drop in the Hong Kong MTR's profitability when the Central-Wan Chai Bypass is opened. If the roads are repurposed or driving is made more expensive, transit ridership rises and transit agencies become profitable.

This is why Marshall's interview and post are so frustrating. If we want the New York MTA to become profitable, we don't need it to buy a bunch of land and build high-rises on it. (In most of the city, the zoning would require them to build parking anyway.) Here are four steps that should do it:

1. Give buses at least one dedicated lane on every major bridge and tunnel.
2. Don't spend billions replacing the Goethals and Kosciuszko Bridges or the Pulaski Skyway. Tear down the Sheridan Expressway and any other highway that is "structurally deficient or functionally obsolete."
3. Institute market pricing to cross the East and Harlem River Bridges, and for parking.
4. Profit!

I know that Marshall is in favor of congestion pricing. He's probably in favor of market-rate parking pricing as well. He might even be in favor of some highway teardowns. Why didn't he say any of that to Andrea Bernstein?


Alon said...

I'm not too enamored with the density argument. Although Hong Kong is extremely dense, less dense cities still have profitable transit (Tokyo, for one).

The main difference between Hong Kong and New York is exactly the way they treated cars. New York embraced them and cleared neighborhoods to build expressways; Hong Kong engaged in traffic restraint, placing high car taxes and gas taxes, effectively charging cars for the scarce city space they use. Traffic restraint in the early period of motorization ensured people would stay on transit until after the city could afford rapid transit, which can retain choice riders.

giles said...

And yet in NYC density is not a given. There is a major housing shortage and absolutely NO attempt to coordinate development with transit access. Among Bloomberg's 100+ rezonings, downzonings are just as likely to happen within a 1/2 mile of a subway stop as upzonings are. If housing were cheaper in NYC more people would move here (and fewer would leave); and if there were more affordable housing with great transit access more would rely on transit. This isn't the only issue obviously, but, to me, it ranks right up there with congestion pricing. In fact, it seems like a nice compliment to congestion pricing, improving access to transit while charging for a scarce resource that suffers from too much demand.

Andy Chow said...

Hong Kong wasn't as developed in the 1950s and 1960s when US was embracing automobiles. At that time Hong Kong was still a 3rd world city, with limited formal housing, high corruption, and no free education.

Despite the fact that Hong Kong invested heavily into the MTR system, it is still building a lot of roads. What they haven't been doing is to destroy existing neighborhoods for highways, but filling the sea to make new land for roads.

Most roads in Hong Kong are occupied by commercial vehicles: trucks, taxis, and buses. Trucks are unavoidable because it serves businesses and industries. Taxis and buses are other forms of transit besides MTR.

Unlike most cities in the United States, buses in Hong Kong are operated by private companies on a franchise basis for profit (comparable to electricity service). The bus companies act as a feeder to rail and a competition to rail.

Alex Marshall said...

All good points Capn Transit. I didn't say any of this on Andrea Bernstein because there wasn't time and I hadn't thought this out as clearly as you. Thanks for the framework for the future. -- Alex Marshall

jazumah said...

The reason that our transit system is not profitable is because the MTA and the state do not want it to be. The only reason why the system is so large is because it once made a profit and people fought to build subways and run buses and trolleys. The idea that transit should be unprofitable is "recent".