by James A. Bacon

I’ve been harping a long time on the idea that rail mass transit is hopelessly uneconomical as practiced in the United States. Projects are subject to massive capital cost overruns, and they exact a heavy toll from taxpayers to cover ongoing operating deficits. Some conclude from my withering criticism of the Rail-to-Dulles project that I am simply “anti-rail” or “anti-transit.” Nothing could be further from the truth. To the contrary,  I believe that the only way to ignite a rail renaissance in this country is to find a business model that makes it profitable.

Making mass transit the preserve of government is a sure-fire loser. Governments have so many stakeholders to satisfy, they don’t know how to run a profitable enterprise. Requiring mass transit to operate with a union workforce creates another drain on productivity and profitability. So does accepting money from the federal government, which imposes all manner of burdensome regulations.

What I couldn’t do before now is point to a profitable and privately run metro rail system. Now I can, thanks to a column written by Alex Marshall (who got his start covering transportation and land use at the Virginian-Pilot). Writing  in Citiwire.net, Marshall highlights the achievements of Hong Kong’s MTR metro system:

If you are ever lucky enough to visit Hong Kong, which is Manhattan-like with its narrow streets lined with high rises, you will see that the MTR’s services are excellent. You may ride the gleaming new high-speed rail line from the new airport that takes you into the new central rail station. Or one of the nine rail and subway lines, including the special train that goes to Disneyland Hong Kong.

What’s amazing about the agency that runs these lines, MTR, is that it actually makes money. So much money that it’s listed on the stock exchange, although the government still owns a majority share.

What’s the secret? Writes Marshall:

Hong Kong’s MTR doesn’t let private developers be the only ones that perch next to its stations. It builds its homes, offices and stores. In short, MTR acts as a real estate developer and business company, as well as a train operator. It owns, among other things, 12 shopping malls built around its stations. These properties and businesses produce substantial cash, which keep the transit agency as a whole in the black.

It’s similar to the way privately financed railroads funded intercontinental railways: The railroads increased the value of land near rail stations, and the railroads made their money selling that land. Later, private streetcar lines did the same thing. In the case of MTR, the company started as a government- owned enterprise and privatized in 2000.

Here in Virginia, we are dunning taxpayers, toll road commuters and commercial property owners to pay for rail improvements that will create massive windfall profits for a few well-situated landowners. We have handed over management of the enterprise to the Metropolitan Washington Airports Authority, whose board decisions have displayed a startling contempt for fiscal prudence. What if Rail-to-Dulles had been conceived as a profit-making enterprise organized by major landowners who stood to reap billions of dollars in value from their real estate holdings? They would have designed a route and system that struck a balance between (a) keeping system costs down and (b) maximizing utility to passengers and value to landowners.

But what if such a consortium couldn’t pull it off? What if the numbers didn’t add up? Well, then, if the project can’t generate a competitive return on investment, perhaps it shouldn’t be built.