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Detractors often bring up the profitability of public transit as a point against spending money on transit projects, but does transit actually need to make money? Let’s talk about that.
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Ever wondered why your city’s transit just doesn’t seem quite up to snuff? RMTransit is here to answer that, and help you open your eyes to all of the different public transportation systems around the world!
Reece (the RM in RMTransit) is an urbanist and public transport critic residing in Toronto, Canada, with the goal of helping the world become more connected through metros, trams, buses, high-speed trains, and all other transport modes.
28 Comments
Nothing needs to profit.
A government is there to provide services to its citizenry, it's not there to make money off of them. A government that is turning a profit off its citizens is an oppressive regime.
I generally agree with all your points, and argue with friends to no end about how roads (and suburbia in general) are heavily subsidized….but…I think too often the word "profit" is given a wholly negative connotation about deriving surplus for surplus sake (which you argue would be better spent reinvested expanding service or lowering fares). I don't know that that's necessarily true though, and my one real plug for at least attempting to move towards profitability is predictability. Look at any city with a metro system in North America, but particularly the U.S., even ones where an expansive metro system (i.e. NYC) is necessary, and every single one will reduce service during recessions because of a dip in tax revenues. We can say "well they just shouldn't do that", but when revenues become scarce and all spending becomes squeezed, I think many people would find it difficult to say that maybe housing services, mental health, etc. should be subject to cuts instead of just reducing train frequency. And yet that recessionary period is precisely when all other factors in society should be pushing more people to transit, because it will be cheaper. A transit system that holistically makes money would be better positioned to be counter-cyclical with the economic cycle and garner more long term riders if it was less reliant on tax revenue, because it could over a long time period maintain steady, predictable service. I just think the route to get there is a more holistic approach to deploying public dollars. For example, every major city has a public housing arm that needs to be bringing online more public housing units, while every transit agency actively supports transit oriented development. Why have those two things be siloed when the money could be allocated to achieve both results at once? Moreover, surplus banked for later can smooth over dips in revenue to maintain steady service. Yes, more service is always better, but for long term effectiveness I would argue that the sustainability and predictability of service is more important for maintaining and growing a ridership base. A rider suddenly having more service will enjoy it but quickly take it for granted. A rider that suddenly has less service frequently turns to other forms of transportation. Sorry for the essay!
The notion that mass transit has to turn a profit shows how effective big business propaganda is.
You really need to visit China, Every point you make is a principle Chinese mass-transit planner follow. It was not always this way, in the early 00's some cities went the wrong way with highways, but country is on track now.
I think this is one thing South Korean transit systems get right — all the payment stuff is integrated and extremely cheap. You can get from one end of Seoul to the other end with 4 transfers from buses to subways and back for quite literally a total of 1-2 dollars, and it makes a huge difference compared to other systems I've experience even in places with amazing (and otherwise much better) transit systems like Japan.
the question should be if and where it makes money, delivering customers to shopping districts?
Do public roads need to make profit? No? Okay same with public transit. That's how you get a car brain around the idea, unless they are dense and stupid af.
Public transport needs money schemes to gain popularity, that's it. As the video said, all public transport systems are impossible to recoup the investment cost by itself, particularly taking inflation for initial capital investment into account. Of course we also know that public transport do not have a myriad of externalities like a car centric network. Just air pollution and its effects: health and maintenance from acid rain, dust from tyre/engine waste etc… alone make up for the cost of public transport. However, it is a huge investment and there's a lot of ways it can siphoned. That's why public transport projects are not as sexy as locally source material, simple technology and small investment into building roads and highways. Even tunnels are less expensive than public transport systems just because you don't have to worry about land acquisition.
That being said, while it usually takes a dictatorship like China to implement, the Japanese model works pretty well. The government foot the bill to build the network, then auction rights of use to private companies. The government will then absorb the least profitable cost. Part of the strategy also revolve around letting companies develop areas around the stations. The monolithic Japanese corporations which runs everything from industrial to real estate. They develop the land and amenities around the network they own, ensuring ridership and profiting from the rising land value. It might cost the public and seems to let money flows into the wallet of big corporations, and also created that infamous bubble, and keeping land value in Japan sky high despite deflation etc… but they work. Japan maintain an efficient and well run public transport network, second only to probably China at this point. But without Japan there wouldn't have been a model for China to develop from.
It should also be said that the reason why rails should be privatise at least somewhat is due to the usual government corruption and inefficiency. Without for profit, private management, quality of service tends to stay the same or deteriorate while cost continues to climb. The half public, half private model had worked for things like healthcare in many countries, ensuring availability but also efficiency. That's why despite huge shortcomings, the Japanese model is definitely something awesome, because it encourages companies to act in a way that's pro-transport, pro-density while maintaining cost effectiveness.
Reece mentioned Japanese commuter railways as examples of profitable operations. Well, sort of… in the case of many/most major metropolitan private operators their rail lines run at a loss or at par. However the groups these railways belong to are profitable and many are quoted on the Tokyo Stock Exchange. This happens because the companies have activities which are parallel and synergic to the railway operations – real estate, retail, buses, taxis, gas stations, stadiums (even baseball teams!), amusement parks, even swimming schools – which help round up revenues. The best analogy is that to a boned fish – the spine is the railway and the flesh are the subsidiary businesses. Take the flesh away and the fish dies, as the spine (railway ops) is not self-supporting; take the spine away and you are left with a bunch of businesses without synergy between them.
Having a public service that recovers 50% of its operating costs in ticketing is already considered a huge success in most Europe if I am not wrong.
And that is OK!
Let me do a weird comparison: public transportation may not give you profit as a housewife does not get a salary from her chores. But try now to hire someone who does house chores! The same with public transportation: not having it is a huge costs for everybody.
One of the issues that lead to the collapse of the USSR was mass deprivation of car ownership. With public transport much better then even luxury soviet cars.
In my city when the Ontario Bill Davis government pushed them to go from making a profit to being subsidized they did it by decreasing the distance between stops from 800 to 500 meters. Now they are bringing in express busses that only stop every 1200 meters. I found that led to a much smoother ride.
It’s good to reframe the topic in terms of economic efficiency- thanks Reese, something people on both sides of the debate could get behind. I can’t imagine public transit with its shared service would be very inefficient once all the costs and income streams, public and private, are figured in.
But who knows. Complex but good topic. And, I suppose it’s good to have the choice to spend more for private transportation if you are able and it’s appropriate. For public transit, quality and frequent service seem like they would drive “profitability.”
Thanks for Chicago footage at the end. ⭐️⭐️⭐️⭐️
I bet private transportation is waaay more expensive when compared to public, per trip, say, unless private was heavily used.
Ill list 2 things
1. Is network southeast, they had a 10% subsidy
and i know its more suburban rail, but is a ""system"" that comes to mind(Youve shown a class 455 thats in service with SWR so i removed a dumb disclaimer)
2. Is city skylines on default transit policy, i know CS is no actual simulation, most of the costs are scaled DOWN but i ussualy operate it on a 6/7 cost subsidy, basicly funding it at a sixth and the seventh being ticket sales
Good luck saying any of this to a public-transport-hater and getting anything to stick in the USA. The moment you talk public transport, you lose them. You have to approach them as a car lover, which is to just complain about traffic and bad drivers. Never let them know you are pro public transport. Instead of "You shouldn't need a car to be able to be a member of society", you should say "We need at the very least some busses to get these s**t drivers off my roads". I know it's dumb, but we do not out number the car-centric people. We have to be them and fight this from their point of view or we will never win.
Bus driver here. My bus consumes 3-5x more fuel than the average car and carry’s 55-85 people (seated, 72-100 standing). Much, much more efficient!
You're on your first steps towards communism. I'm loving it <3
I do think that there needs to be a cost. However, I do not think that cost needs to cover the costs. When things are "free", they are usually taken for granted. However, it needs to be affordable so that the poor and rich can use the services available.
New Jersey Transit, the transit system I grew up riding, is facing a potential $1 billion deficit by 2027. On top of that, they need to build a new rail tunnel under the Hudson River, a new bridge over the Hackensack River, and also need to help fund the renovation or reconstruction of Penn Station. My thought is, that’s still no excuse to put off improving the system. They’d just be delaying the inevitable, and ultimately would end up having to spend infinitely more money than they have to right now. This is especially true if their failing infrastructure caused some sort of accident. They’d be getting sued by lots and lots of people.
I have to kindly disagree with you less governments more markets. Money is communications if I charge double the average fair of a government subsidized bus but get a majority of the customers, then I might have faster busses, or they are more comfortable ect.Then we have to look at why maybe these business aren’t profitable, is it cause it can’t happen or is it BECAUSE of the government? Redtape might make it too expensive, making a fair too small might label you a “price gouger” so being punished for what people keep asking for lower prices.Then taxes might be reason say you make 100,000 but some law is made for a taxes and Uncle Sam takes 50% now you only have 50,000 & in the red. Then they’ve actively given your competitor subsidize now your out of business or in the red massively. Lastly maybe the market needs a new way of payment have the bus just pick people up but payment isn’t required have a “Goal” of how much the business wants to make,money it may need for maintenance, non of which customers have to pay but if they are happy with there service and want the bus to come around you might chip in a lil,then lastly it might just be cause inflation which is the the feds area so
profit calls for more competitiveness, companies innovate to be more efficient or provide a better service to attract costumers. profit also says that a service is valued enough by people that their are willing to pay for it, therefor is creating value. if a service is in deficit, it is consuming more resources than incomes people are willing to pay, so it's destroying wealth.
you're doing a pro public transport speech, with no regards to the real economics.
still, people choose driving over government mismanaged public transit in many european countries
Public transport spending more money than it directly earns is not a loss. It's a cost that has earns the city more money in terms of reduced costs in other areas, roads in particular, but also stimulates economy for all parts it connects to. For the city as a whole it's a net profit any way you slice it.
The irony of comparing buses to local sewers highlights the downside of accessibility. Public transit is a public space, and we seem to as a society have decided that accessibility takes precedence over user experience and turned it into rolling homeless shelters and insane asylums, driving away users.
I think there’s a lot more to be said about the cultural double standard between roads and public transit, especially in North America. People will make a big deal about the cost of a new transit project, but nobody really bats an eye at road expansion projects that cost millions or billions of dollars. And nobody expects roads or highways to be profitable, either. Even transit systems with pretty low cost recovery are going to be far more “profitable” than road systems, simply because they charge a fare, which society has come to expect as normal.
The expectation of free parking in cities is also a huge double standard. Here in Halifax, the city recently started charging for downtown parking on Saturdays (it was previously free on weekends). There’s been no shortage of public backlash, of course, from folks who expect to store their private property (cars) on valuable public land for free. And yet, transit users have always had to pay a fare 7 days a week to get downtown… which is fine, but why should we have to pay to get on a bus if they don’t have to pay to park their car? (Side note: parking is still free on Sundays so far, so it would sure be nice if transit was free on Sundays too, just saying…)
I think I have seen some videos mentioning studies that as long as the service is shitty, it doesn't matter how cheap it is, it won't lower personal vehicle use at peak hours. Also, with really deep subsidies, it just would help inflation. It's a little like the chicken and the egg.