The Option of Profitable Transit

David Levinson’s post saying that transit should strive to restructure and be profitable stirred much discussion on neighboring blogs, including Human Transit (which broadly agrees with the idea if not the libertarian tone) and The Transport Politic (which does not), as well as multiple commenters who chimed in noting that it’s ridiculous to require transit to break even when cars get so many subsidies. While I agree with Levinson and Jarrett’s sentiments about core versus welfare services in principle, in practice the causes of transit losses are orthogonal to the subjects under discussion; the actual issues are somewhat related to what the commenters mention, but those commenters don’t go nearly far enough.

In the original post, Levinson proposes the following distinction:

Mass transit systems in the United States are collectively losing money hand over fist. Yet many individual routes (including bus routes) earn enough to pay their own operating (and even capital costs). But like bad mortgages contaminating the good, money-losing transit routes are bogging down the system.

We can divide individual systems into three sets of routes:

1. Those routes break-even or profit financially (at a given fare). This is the “core”.

2. Those lines which are necessary for the core routes to break-even, and collectively help the set of routes break-even. These are the “feeders”.

3. Those lines which lose money, and whose absence would not eliminate profitability on other routes. These money-losers are a welfare program. We might politely call them “equity” routes.

Jarrett, whose work has focused on priorities, not only agrees with the distinction but also downplay the importance of routes in category #2, and has often advocated that agencies let go of low-performing routes and concentrate on trunk frequency. While Jarrett is right and this distinction is critical when an agency needs to reduce its expenditure, it’s not going to make any agency profitable.

The number of routes in the US that break even financially is minimal. It’s easy enough to come up with routes that cover their avoidable costs, but transit has enough fixed costs that retreating to them is not going to be enough. For a New York example, see this spreadsheet, due to Cap’n Transit: although multiple bus routes are portrayed as profitable, once one checks the more detailed spreadsheet the Cap’n links to, it turns out that when including both direct and indirect operating costs, the best-performing route, the M86, drops from an operating ratio of 172% to one of 91%. Moreover, the best-performing routes do not form a trunk system, but are for the most part short-hop crosstown buses, with very high ridership per kilometer of route length. Most networks that actually are profitable consist of buses feeding into the Lincoln Tunnel, a choke point that has an exclusive bus lane in the morning rush hour.

Since in some other parts of the world urban transit is in fact profitable, we need to address causes other than the existence of lesser-used routes. I propose that instead of classifying American lines into profitable and unprofitable ones, a division in which one category is going to be very lonely, we classify whole networks according to what makes them lose so much money. I believe the following list of causes is relatively uncontroversial for good transit advocates:

1. High labor costs, predominantly overstaffing, but at some agencies (for example, Muni) also very high salaries.

2. Poor design, e.g. of intermodal transfers.

3. Low fares on some networks, which exist predominantly to provide minimal mobility of last resort rather than core transportation.

4. Bad regulations, especially when it comes to regional rail.

5. An auto-oriented policy.

Cause #5 is the elephant in the room. It’s not just ongoing auto subsidies and such mandates as Euclidean zoning and free parking. It’s also a decades-long history promoting auto-centric development, as a result of which uses are too widespread and low-intensity for transit to be of much use on most trips. Even edge cities are too dense sometimes; if you can find Robert Lang and Jennifer LeFurgy’s sadly now behind paywall article Edgeless Cities, read it for a quick explanation of the limitations of the relatively intense but auto-centric development form of Tysons Corner or White Plains.

The best analogy I can give here is a growing industry or industrial zone. Early on in a country’s development, it will want industrial policy: subsidies, tax breaks, protectionism. The US railroads got it, most Japanese exporters got it, Samsung and Hyundai got it. As a country becomes richer and its economy becomes more mature, those industries become profitable and suddenly start advocating free trade and free markets, even for themselves, and whine loudly at the suggestion that rich regions or industries should subsidize poor ones.

There are plenty of routes in the US that, while unprofitable now, could be made profitable with better management and operating practices. This is usually what I write about. Those are causes #1, 2, and 4. Cause #3 applies to some but not the most relevant agencies; fares in large US cities tend to be average or high by international standards, though perhaps lower than the revenue-maximizing fares. Altogether, fixing what are essentially issues of competence is going to raise transit use, possibly to acceptable levels. But it will not turn New York into Tokyo, Boston into Taipei, or Providence into Zurich.

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17 Responses to The Option of Profitable Transit

  1. Danny says:

    Excellent post. I would also include bad procurement processes. Even though some of the high cost of rolling stock/infrastructure is due to bad regulations like Buy America and the FRA, plenty of it comes down to either incompetence or poor branding strategies.

    Just one example of the incompetence is when agencies don’t fully analyze the cost tradeoffs of low-floor vs high-floor vehicles, or when they issue RFPs that are too specific, ruling out off-the-shelf equipment.

    In terms of poor branding, to me it is quite apparent that the branding strategies of many transit agencies shows that they feel their competitors are other transit agencies. Unfortunately, this idea of competing against other transit agencies means that they focus differentiation efforts on what other transit agencies provide. In other words, “Our buses look more futuristic!”, or “Our light rail stations are works of art!” or “Our trains have a top speed of 150mph!” I guess in the competition for federal or regional tax money, there might be some wisdom in that…but in the competition for mobility decisions, there is almost no value added there.

    As a side note, I think I either didn’t read the Tokyo P&L right, or Google’s currency converter isn’t working. 377,600 in millions of yen translated to about $4.93 billion…which would place the Tokyo Metro at #456 on the current Fortune 500 if it were a domestic corporation. And it would be more profitable than the fortune 500 company that I currently work for.

  2. No argument with this, but I feel misrepresented when you write: “Jarrett, whose work has focused on priorities, not only agrees with the distinction but also downplay the importance of routes in category #2, and has often advocated that agencies let go of low-performing routes and concentrate on trunk frequency. ”

    No, I don’t categorically advocate that. I emphasize that low-performing routes in ridership terms may be high-performing in terms of some completely different goal, such as social inclusion or equity. The tradeoff between ridership goals and social inclusion goals is a value judgment that each community should make for itself in my view. I do insist that it’s not coherent to pretend that you’re serving both values at once, because the two goals push transit network design in opposite directions.

    So yes, Levinson’s schema is also mine, but minus his tone, minus his mushy category #2, and with greater emphasis on the fact that most lines succeed only as a network.

    • Alon Levy says:

      You’re right that you’re not advocating cutting coverage routes outright. But, at least as you portray it on Human Transit, you confront transit agencies with the tradeoffs that have to be made between higher-ridership routes and coverage routes, and the values embedded in each. This is not what your average transit activist does; political transit activists tend to never think in terms of either/or, and talk about increasing the size of the pie rather than prioritizing.

      Although you’re notionally neutral, in reality the quote-unquote normal answer to the dilemma is to go for ridership; it sometimes feels similar to your presentations about the geometry of transit and buses vs. rail.

      • Nathanael says:

        Jarrett can be remarkably and bizarrely *wilfully* ignorant of the political aspects of transit. I don’t consider myself a “political” (by instinct I’m technical) but the big political picture is another technical matter to navigate. Bus vs. rail? The punters prefer rail, always and everywhere, so for votes’ sake give them rail. (Unless, you know, you’ve got a really weird community.) Tradeoffs on what to cut? Don’t do it, discuss tradeoffs in what to *add* instead. If you can put *needed* cuts (“This bus has 6 passengers per day”) in the context of valuable additions (“They can walk one block to a bus which will carry 1000 passengers!”), all the better.

  3. You really nailed it with this one. Looking at the specific lines that are profitable or the least unprofitable and eliminating others stays within the top down framework that has always shaped transit in the US. Your points get to the policy environment that is preventing transit systems from operating profitably. That elephant in the room is likely the most difficult of your five points to tackle, but working with the other four issues at the local level could really improve transit viability and make it more popular with taxpayers.

  4. Under “List of Causes”; I’m not sure if you would file “appallingly low average speed” and “appallingly high non-revenue hours” under some combination of “poor design” and/or “auto-oriented policy” (and perhaps “high labor costs”), but it has to be up there.

    Productivity of all US public transportation is shocking. The systems are operated more as welfare agencies for agency employees than they are as straight legitimate welfare for the car-less.

    Simply put, buses (and trams, and trains, and ferries, and cable cars) spend a huge percentage of their ever-depreciating lives either not moving or not carrying passengers. The agency employees who pilot these vehicles are paid too much to wait and not enough to move. The agency employees who maintain these vehicles are paid too much to tinker with bloated fleets and not enough to deliver revenue minutes per vehicle per day.

    Some of this is “auto-oriented policy” (40 people in one bus get lower intersection signal priority and fewer m^2 of asphalt than a single occupant vehicle), but that’s just one contributing factor. Moreover, it is potentially under the agency’s control (or directly under its control in cities such as San Francisco, or can at least be influenced by transit agency advocacy anywhere) but no attempt is made to present “make buses move faster” as an economic good-government policy. Easier to plead for business as usual operating subsidies and for fantastical capital spends that increase operating costs.

    I don’t think one can talk about “profitability” without addressing the uniformly dismal productivity of human and capital assets in the US transit “industry”.

    • Nathanael says:

      No, Richard.

      San Francisco is for better or worse a special case. Go look at that article I mentioned a while back on San Francisco’s defunct “throw money at everyone, don’t worry about trying to make things work” municipal government culture.

      This is actually not normal — generalizing from San Francisco is just wrong. Most transit agencies have little control over speeding up the buses, but do their best; most try to construct rational, efficient route systems and are relatively successful, but stymied by various forms of political interference, or indeed by insufficient funding to maintain fleets properly.

      • Alon Levy says:

        When RIPTA doesn’t need external bloggers to post clear maps of where the buses in its BRT tunnel go, I’ll believe it tries to construct rational, efficient route systems.

        • Nathanael says:

          Where is RIPTA and what tunnel do they have? I’m not placing it.

          • Alon Levy says:

            In Providence – RI stands for Rhode Island. For the tunnel, see here.

          • Nathanael Nerode says:

            OK, I’ll agree with you:
            Providence isn’t even trying.

            I suppose the fact that I didn’t even know Providence HAD a bus system (and I poked around to see what buses connected to everywhere on the NEC — AND I visited Brown) does also indicate something along the lines of “not even trying”!

            I don’t think that’s typical, though I suppose I’d have to do a statistical study. Most towns where I could tell that there was a bus system were clearly trying, San Francisco excepted.

  5. I think number 5 is less independent from the first four than many transit advocates would like to admit. A lot of auto-oriented policy is justified by the fact that there’s not good transit access – which, quite frankly, is true.

    • Alon Levy says:

      To be honest, I think it’s exactly the other way around. Auto-oriented policy began when there was very good transit access in most cities; part of the policy was to tax transit to pay for road infrastructure, overregulate it, or enact zoning laws that are incompatible with a transit city. This forced government takeovers, leading to more politicization, the proliferation of a transit-as-welfare mentality, and stagnant productivity.

      • Nathanael Nerode says:

        Steve Munro’s bitching about how the City of Toronto refuses to implement transit priority traffic lights for the streetcars, even after they agreed to do so many years ago, gives an example of how auto-oriented policy is independent of any lack of transit access.

  6. Nathanael says:

    LIKE LIKE LIKE. :-)

    You nailed it with this post.

  7. joe_eureka says:

    Equity routes should be called Losers, Nonprofitable routes or something truly descriptive. Profitable routes should be only those that also pay for operating and Capital Costs.
    Seems Transit folks are like the old Soviets in playing with words.

  8. Pingback: Commentary on ‘Towards financially sustainable mass transit systems’ | Transportationist.org

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