Hong Kong’s MTR (Mass Transit Railway Company) is one of the most profitable transit systems in the world. Rider fares amount to roughly 186% of its operating costs.
In comparison, Toronto recovers about 70% of its operating costs from fares and New York recovers 57%. This means that in the latter two cases, government subsidies are required to keep the systems in operation.
On top of this, Hong Kong relies on a unique “rail plus property” model, meaning that they also use the profits from real estate development activities to fund transit expansion. Here’s more on how it works:
"In a value capture scheme, MTR is granted low-cost land around its future stations [from the government]. It then develops the land and uses the profits to pay for system expansion. Through this system, MTR has managed to build subways and elevated rail lines throughout the islands that make up Hong Kong, largely paying its own way."
Overall, this seems to make a lot of sense. Which begs the question, could this model - specifically “rail plus property” - be exported to other cities?
NextCity asked this question with respect to New York, but came up with 3 problems: first, New York has an operating shortfall, unlike Hong Kong; second, New York doesn’t have the same amount of government owned land; and third, construction costs are way higher in NYC.
The first thing that comes to my mind is, why are Toronto and New York so bad at farebox recovery? Our infrastructure is not self sustaining; we’re reliant on government handouts.
Looking at fare pricing, there’s a big difference between the cities. Hong Kong charges based on distance traveled, whereas Toronto and New York charge a flat rate. Intuitively, dynamic pricing makes sense, since you’re then able to capture shorter rides that would otherwise be replaced by walking (or other alternatives) and you capture more value during longer rides.
The other big difference is the hyper density of Hong Kong, since we know there’s a correlation between urban density and transit ridership. I would assume that the demand for most of their rail lines is fairly high. And it’s for this exact reason that I’m opposed to the new Scarborough subway line here in Toronto. Building subways in areas of the city without the densities to support it will only exacerbate our farebox recovery problem.
As for the other two points regarding government land and high construction costs, I have to believe that there’s a way to create a “rail plus property” model that circumvents these concerns.
For one, why does it have to be government land? Could we not reward developers with additional density if they build a subway station in the basement of their new building or contribute to a transit fund? The city already allows additional density near subway stations. Why not do the same for locations where we simply want a station?
Transit is too important not to get right. I hope Toronto will soon understand that.
Politics rewards consistency. Even if you’re wrong, it’s better to be consistently wrong than come across as wavering - however noble and rational the intentions may be. And that’s exactly what happened with Rob Ford and his commitment to subways, subways and subways.
John Lorinc of Spacing wrote an interesting piece yesterday on how, despite all the debating that went on, Ford is delivering what he said he was going to deliver: a subway. It doesn’t matter that all technical and financial considerations were thrown out the window, he got it funded.
As I said earlier this week, I think the Scarborough line is the wrong subway to be building and that the downtown relief line is infinitely more important for the region. However, Lorinc makes a good case in his article for why this line will not be funded despite the current focus on subways, subways and subways:
“Fourth, it’s important to recognize that there will be one notably perverse exception to the foregoing, which is the [Insert Euphemism Here] Relief Line. I do admire Josh Matlow’s advocacy on this front. But Ford will never take up the DRL cause because (i) he doesn’t get the purpose of said extension; and (ii) because the project doesn’t butter his bread, electorally speaking. I’m guessing it will be years before someone with the mayor’s block-headed tenacity emerges to champion a line with a politically inconvenient name and an eye-bulging price tag.
In fact, the sheer heft of the relief line will allow marginally useful yet politically supported subway projects — extensions in the west end to Sherway Gardens or up Yonge to Richmond Hill – to continue to elbow their way to the front of the line, just exactly as the Scarborough subway project did. Indeed, because we no longer care, at any level of government, about subjecting our transit investment choices to a rational policy framework, the most crucial project in the GTA will always lose out in the funding lottery because it has the most diffuse constituency and the most conceptually complicated purpose.”
The disparaging thing about these two paragraphs is that it’s a sad reality.
Every time I bring my car in for service, I’m reminded of how expensive it is to maintain one. Between car payments, insurance, gas, parking in the city and service, owning a car eats into a lot of disposable income.
So for cities where the residents don’t need a car to get around, there’s potentially a lot of additional income that can get placed in other sectors of the economy.
Richard Florida, and others, have argued that we’ve historically been overspending on housing and transportation, and that it restricts capital from flowing into other, more productive, areas of the economy.
I’d be curious to see a study that compares transportation spending versus other local economic measures. How would a driving city compare to a public transit or biking city?