Obviously yes, you have to since the vast majority of expenses (>70%) are fixed costs. If you only exclude them and only look at marginal costs, they're profitable.
But you cannot run a transit system on marginal costs, so using that comparison is also misleading.
The usual rule of thumb is that fixed costs of public transit are covered by increased property values. It could mean a private transit company developing the areas around stations (as it often works in Japan), or it could mean the government getting more money from property taxes. Or it could even mean more money from income taxes, if the transit project stimulates economic activity.
If a transit project doesn't increase property values enough to justify the investment, or if the entity funding the project cannot extract that value, the project rarely makes sense.
Do you mean that nobody wants property values go up? The government gets more property taxes, because properties near transit stations are more valuable than in other places.
Yes, if you don't intend to sell, and actually want to live somewhere, higher property values just mean higher taxes (or if constrained like with Prop 13, declining services).
This doesn't have to be true. Washington State, for example defines the amount of property tax revenue to be charged and then divides that in proportion to everyone's taxable value.
So if everyone's value goes up 40% your property tax bill stays the same. If your area climbed faster than others, it goes up but not by 40%.
If property prices increase 40%, then cost of living increases, government needs to collect additional revenue to pay employees a living wage, and that feeds into taxes. Even without higher order effects, the above chain was literally about net increases in property taxes to fund more services and saying it's fine because property values increase (in specific locations, too). But property values are not a tangible thing for anyone who doesn't want to sell.
Subsidies for public goods create economic multiples. It’s not plainly obvious that it’s bad to subsidize a trip by $10. And compared to what? How much is interstate infrastructure subsidized per trip? Or airline infrastructure?
the person riding transit benefits themselves, and their landlord, and the people driving.
they also benefit their workplace, by both working there, and not having to store a car there, and then anywhere they spend money at their destination, or the transit stops they used.
the value of the transit line is all over the place
Largely it is, according to both classical economic theory and modern empirical studies.
Often called 'land value uplift' these days, or 'unearned increment'/'land monopoly rents' in days gone by.
Theoretically in a free market, the landlords will be able to increase rent in proportion to the 'market value' of the convenience to the tenants (short commutes, etc). Likewise, homeowners will sell for a higher price - capturing the value that would be conferred to new owners. A city with good transport demands higher rents in outer suburbs serviced by that transport.
Your workplace likely also rents their premises too. They now have a convenient train station 5 minutes' walk away - and guess what, their landlord ups the rents too. Once again, in proportion to the 'market value' of the convenience to the workplace. The nearby cafes will now increase their coffee price to cover their increased rent.
Although this is the position of most economists, politicians are often reluctant to draw attention to it. Instead, where I live, they use models like commute time saved per person' x 'number of people' x 'average hourly wage'.
You can verify all of this yourself by viewing residential and commercial rental listings in your city.
Many economists have proposed solutions to this problem, often in the form of land value taxes.
Obviously yes, you have to since the vast majority of expenses (>70%) are fixed costs. If you only exclude them and only look at marginal costs, they're profitable.
But you cannot run a transit system on marginal costs, so using that comparison is also misleading.
Thought experiment: What would happen with total profitability, given positive marginal unit economics, if readership were to greatly increase?
I’d imagine it would get really congested unless massive fixed costs were expended to make the system higher capacity.
The usual rule of thumb is that fixed costs of public transit are covered by increased property values. It could mean a private transit company developing the areas around stations (as it often works in Japan), or it could mean the government getting more money from property taxes. Or it could even mean more money from income taxes, if the transit project stimulates economic activity.
If a transit project doesn't increase property values enough to justify the investment, or if the entity funding the project cannot extract that value, the project rarely makes sense.
Now you’ve created a property tax regime where nobody is going to want to own residential property near a transit station.
typically people want to live nearby transit stations because it means you can get places cheaply.
the property value goes up because of increased demand for it
Do you mean that nobody wants property values go up? The government gets more property taxes, because properties near transit stations are more valuable than in other places.
Yes, if you don't intend to sell, and actually want to live somewhere, higher property values just mean higher taxes (or if constrained like with Prop 13, declining services).
This doesn't have to be true. Washington State, for example defines the amount of property tax revenue to be charged and then divides that in proportion to everyone's taxable value.
So if everyone's value goes up 40% your property tax bill stays the same. If your area climbed faster than others, it goes up but not by 40%.
If property prices increase 40%, then cost of living increases, government needs to collect additional revenue to pay employees a living wage, and that feeds into taxes. Even without higher order effects, the above chain was literally about net increases in property taxes to fund more services and saying it's fine because property values increase (in specific locations, too). But property values are not a tangible thing for anyone who doesn't want to sell.
declining services here would mean that transit station stops gwtting service though, decreasing your property value
How is it misleading? Taking the total cost to operate and dividing by the number of rides tells you what it costs per ride.
I’d be more interested to know how so many people are paying less than $1 for a mini trip when the fare is closer to $3.
Because it makes in implicit comparison with a hypothetical transportation mode with zero dollars of government subsidy.
The automobile analogue to fares is gas taxes, so the first crack at a true comparison is to compare the Caltrans budget to gas tax receipts.
Subsidies for public goods create economic multiples. It’s not plainly obvious that it’s bad to subsidize a trip by $10. And compared to what? How much is interstate infrastructure subsidized per trip? Or airline infrastructure?
I think most economists would contend that the value of the subsidies is largely captured by landowners. Public investment, private profits.
is it though?
the person riding transit benefits themselves, and their landlord, and the people driving.
they also benefit their workplace, by both working there, and not having to store a car there, and then anywhere they spend money at their destination, or the transit stops they used.
the value of the transit line is all over the place
Largely it is, according to both classical economic theory and modern empirical studies.
Often called 'land value uplift' these days, or 'unearned increment'/'land monopoly rents' in days gone by.
Theoretically in a free market, the landlords will be able to increase rent in proportion to the 'market value' of the convenience to the tenants (short commutes, etc). Likewise, homeowners will sell for a higher price - capturing the value that would be conferred to new owners. A city with good transport demands higher rents in outer suburbs serviced by that transport.
Your workplace likely also rents their premises too. They now have a convenient train station 5 minutes' walk away - and guess what, their landlord ups the rents too. Once again, in proportion to the 'market value' of the convenience to the workplace. The nearby cafes will now increase their coffee price to cover their increased rent.
Although this is the position of most economists, politicians are often reluctant to draw attention to it. Instead, where I live, they use models like commute time saved per person' x 'number of people' x 'average hourly wage'.
You can verify all of this yourself by viewing residential and commercial rental listings in your city.
Many economists have proposed solutions to this problem, often in the form of land value taxes.
and that's why property tax exists (land value tax would be better, but anyway).
They're discarding the cost per mile to a driver. If you add that back (and especially if you add externalities back) driving is more expensive.