Lessons From Hong Kong’s Transit System

Oct 9, 2015 | International, Transportation


Residents of Washington D.C. love to complain about the Washington Metropolitan Area Transit Authority’s subway system, referred to as “the Metro.” From single tracking to broken cooling systems, riders find much to grumble about. Needing a place to publicly vent, many Metro riders have taken their frustrations to Twitter, using the hashtag #UnsuckDCMetro.

The Metro seems even more flawed when it’s compared to public transportation in Hong Kong, which hosts the best transit system in the world. This system, managed by the Mass Transit Railway (MTR) Corporation, is the gold standard of public transportation. WMATA officials and city leaders in Washington can learn a lot from MTR, particularly when it comes to financing the world’s most efficient transit system.

Several metrics indicate that the MTR is the global leader in providing transit. In 2012, MTR produced revenue of $5 billion dollars while turning a $2 billion dollar profit. MTR’s farebox recovery rate — the rate at which its operating costs are covered by fares — is the world’s highest at 185%. In comparison, WMATA’s farebox recovery rate in 2014 was 67.5%, New York’s MTA was 51.2%, and Chicago’s CTA was 43%. The MTR offers clean and serviceable trains and buses that run on time, transporting passengers throughout an intricate and expansive system that spans the entire island. The stations are also state of the art: glass doors that block the tracks, touch and go fare payment, visible signage, first-class cars, and handicap accessibility.

The success of the MTR is largely due to its unique financing system called “value capture.” This type of financing enables the MTR to turn a profit, which is a rare feat in public transportation. It is also unique to Hong Kong, which is one of the densest urban environments in the world. Due to the compact nature of the city, businesses rely on the MTR to transport customers to their stores to shop. In a city where car ownership is prohibitively expensive, the MTR plays a significant role in the commercial activity of the city’s passengers. In return for transporting customers to their stores, MTR receives either a percentage of the stores’ profits, enters into co-ownership with the commercial real estate owner, or receives a portion of property development fees. Since the majority of commercial stores are housed in shopping malls and skyscrapers located near or are attached to MTR stations, the system provides an enormous source of revenue to the railway. Additionally, MTR leases out retail space in its stations, which essentially serve as shopping malls for many passengers.

While this system is incredibly successful in its own right, it’s difficult to compare the MTR to any other transit system in the world, much less to any system in the United States. MTR’s success is largely enabled by Hong Kong’s dense urban fabric. Without this, MTR’s financing system would be infeasible. Value capture is integral to MTR’s success: It allows the corporation to invest in new technologies, expand its workforce, and improve customer service without having to beg for public funds. Additionally, MTR doesn’t have to transport citizens from distant suburbs, which is a major source of difficulty for many transit systems, particularly in D.C.

Hong Kong’s Mass Transit Railway is a shining example of how public transportation can work well if properly financed. City leaders and transportation officials in this country can learn much from its success. While Washington D.C. doesn’t have the density of Hong Kong, city leaders could implement value capture financing where commercial real estate or retail is housed in or near Metro stations, such as in Metro Center, Pentagon City, or Union Station. As the Metro expands and more retail emerges in the city’s transit hubs, Metro could increase its revenue without having to rely on city subsidies. With the recent threat of federal takeover, Metro might have to seriously consider implementing value capture as one way to increase revenue and avoid rate hikes.

Topics: China