How much are transit systems worth?

iheartthed · #1 Posted **Jun 3, 2021, 4:49 PM**

Rail transit systems don't get valuations, but they are pretty valuable assets. Recently, I was thinking about how ridership of major transit systems resembles that of some large transportation startups. In 2019, for instance, the NYC subway had about 1.7 billion passengers, and the same year Uber had about 7 billion passengers. Today, Uber has a market cap in the neighborhood of $100 billion, so is it fair to value the NYC subway around $25 billion? That seems very low.

Another way to look at it is the cost of building the same system in modern costs. $25 billion wouldn't be enough to rebuild the NYC subway from scratch today, and a big part of that is because of how successful the subway has been in making New York real estate so valuable. The Second Avenue subway cost roughly $2 billion per mile in 2017 dollars, and the entire subway system has 248 miles. So, you could use that estimate to say it's worth roughly $500 billion.

What would some other transit systems be worth using either of these methods? Also, what are some other ways to value transit systems?

202_Cyclist · #2 Posted **Jun 3, 2021, 4:53 PM**

Another consideration is how much would it cost to accommodate the passengers who use passenger rail if this did not exist. Estimates for building one mile of highway in urban areas range from several hundred million dollars to a billion dollars or more. Considering that transit is located in the densest parts of metro areas, the upper end of this estimate for highway construction should probably be used.

Doady · #3 Posted **Jun 3, 2021, 5:01 PM**

The amount of space and infrastructure that would be required for parking in cities if there was no transit is something else that probably should be considered.

Innsertnamehere · #4 Posted **Jun 3, 2021, 5:35 PM**

nothing because they don't generate profits.

Their assets have scrap value for the materials I guess?

In order to be worth something you need to generate value for the owner. The problem with transit is that it's a money losing operation. It generates lots of value for society, but not the owner.

202_Cyclist · #5 Posted **Jun 3, 2021, 5:41 PM**

Quote:

Originally Posted by Innsertnamehere

nothing because they don't generate profits.

Their assets have scrap value for the materials I guess?

In order to be worth something you need to generate value for the owner. The problem with transit is that it's a money losing operation. It generates lots of value for society, but not the owner.

How much profit has I-95 or I-5 generated?

iheartthed · #6 Posted **Jun 3, 2021, 5:55 PM**

Quote:

Originally Posted by Innsertnamehere

nothing because they don't generate profits.

Their assets have scrap value for the materials I guess?

In order to be worth something you need to generate value for the owner. The problem with transit is that it's a money losing operation. It generates lots of value for society, but not the owner.

A lot of things have value that don't generate profits... like your house. And Uber.

Gantz · #7 Posted **Jun 3, 2021, 5:56 PM**

Quote:

Originally Posted by Innsertnamehere

nothing because they don't generate profits.

Their assets have scrap value for the materials I guess?

In order to be worth something you need to generate value for the owner. The problem with transit is that it's a money losing operation. It generates lots of value for society, but not the owner.

Some rail transit systems around the world do generate profit, such as MTR in Hong Kong.
NYC MTA doesn't have the right structure or incentives to generate money. Instead they just get tens of billions of dollars per year from taxpayer. Unfortunately, transit is not even the number one priority for the MTA.

Camelback · #8 Posted **Jun 3, 2021, 6:42 PM**

Quote:

Originally Posted by iheartthed

Rail transit systems don't get valuations, but they are pretty valuable assets. Recently, I was thinking about how ridership of major transit systems resembles that of some large transportation startups. In 2019, for instance, the NYC subway had about 1.7 billion passengers, and the same year Uber had about 7 billion passengers. Today, Uber has a market cap in the neighborhood of $100 billion, so is it fair to value the NYC subway around $25 billion? That seems very low.

Another way to look at it is the cost of building the same system in modern costs. $25 billion wouldn't be enough to rebuild the NYC subway from scratch today, and a big part of that is because of how successful the subway has been in making New York real estate so valuable. The Second Avenue subway cost roughly $2 billion per mile in 2017 dollars, and the entire subway system has 248 miles. So, you could use that estimate to say it's worth roughly $500 billion.

What would some other transit systems be worth using either of these methods? Also, what are some other ways to value transit systems?

I agree, $25 billion seems very low, bc you're comparing a system that occupies physical space, infrastructure, real estate, tunnels, rail, subway cars, employees to Uber, a system if you will that has very little overhead, independent contractors, doesn't own the fleet of cars, roads, infrastructure or real estate.

Camelback · #9 Posted **Jun 3, 2021, 6:44 PM**

Quote:

Originally Posted by 202_Cyclist

How much profit has I-95 or I-5 generated?

Profit is not the right word, but the roadways have generated trillions when it comes to commuters and commerce that benefit from the roadways for all forms of government.

202_Cyclist · #10 Posted **Jun 3, 2021, 6:57 PM**

Quote:

Originally Posted by Camelback

Profit is not the right word, but the roadways have generated trillions when it comes to commuters and commerce that benefit from the roadways for all forms of government.

As have transit systems.

mhays · #11 Posted **Jun 3, 2021, 7:08 PM**

One method would be replacement cost, including the transit itself plus the ROW. I'd WAG that the cost even just within NYC would be several hundred billion, just for rail.

Another would be the value of the service vs. a no-replacement scenario. A city like New York couldn't function without transit. "Priceless" wouldn't be far off.

Crawford · #12 Posted **Jun 3, 2021, 7:13 PM**

Transit systems are mobility and placemaking engines that create tremendous private sector value. NYC, Tokyo, London, Paris, etc. would cease to function if their heavy rail systems were permanently shut.

Even incremental improvements have major regional implications. A good example is NJ Transit rail service into Manhattan. Twenty years ago, a major rebuilding increased the number of direct rides into Penn, where before many commuters had to transfer in Newark or Hoboken. The towns with the direct service saw property values skyrocket, while the towns that still had the transfer service saw property values stagnate.

Or look at Hudson Yards. That neighborhood couldn't exist absent the 7 train and Penn Station expansions.

And, granted, interstates create value too, but they also have massive negative externalities and destroy value in many locations.

JManc · #13 Posted **Jun 3, 2021, 7:14 PM**

Quote:

Originally Posted by iheartthed

Rail transit systems don't get valuations, but they are pretty valuable assets. Recently, I was thinking about how ridership of major transit systems resembles that of some large transportation startups. In 2019, for instance, the NYC subway had about 1.7 billion passengers, and the same year Uber had about 7 billion passengers. Today, Uber has a market cap in the neighborhood of $100 billion, so is it fair to value the NYC subway around $25 billion? That seems very low.

Another way to look at it is the cost of building the same system in modern costs. $25 billion wouldn't be enough to rebuild the NYC subway from scratch today, and a big part of that is because of how successful the subway has been in making New York real estate so valuable. The Second Avenue subway cost roughly $2 billion per mile in 2017 dollars, and the entire subway system has 248 miles. So, you could use that estimate to say it's worth roughly $500 billion.

What would some other transit systems be worth using either of these methods? Also, what are some other ways to value transit systems?

If MTA tried to 'sell itself', it would not even come close to getting $500 billion because ROI on a transit system with shoestring margins is pretty low; at least compared to a ride sharing company with an inflated market cap. That $2 billion per mile spent on that subway line doesn't mean it's worth $2 billion per mile. That said, transit's intrinsic value is tied to the health and wellbeing of the local economy and community and hard to put a price tag on it.

iheartthed · #14 Posted **Jun 3, 2021, 7:25 PM**

Quote:

Originally Posted by JManc

If MTA tried to 'sell itself', it would not even come close to getting $500 billion because ROI on a transit system with shoestring margins is pretty low; at least compared to a ride sharing company with an inflated market cap. That $2 billion per mile spent on that subway line doesn't mean it's worth $2 billion per mile. That said, transit's intrinsic value is tied to the health and wellbeing of the local economy and community and hard to put a price tag on it.

A private owner of the subway would definitely hike the price per ride lol.

Camelback · #15 Posted **Jun 3, 2021, 7:25 PM**

Quote:

Originally Posted by 202_Cyclist

As have transit systems.

Oh definitely!

UrbanImpact · #16 Posted **Jun 3, 2021, 7:59 PM**

Quote:

Originally Posted by iheartthed

A private owner of the subway would definitely hike the price per ride lol.

Yup, the ticket prices for the Brightline private high speed train line here in South Florida are steep with their +/- $15 one way tickets from Miami to West Palm Beach, but, the trains and stations are super nice.

SIGSEGV · #17 Posted **Jun 4, 2021, 2:21 AM**

The total amount of real estate in NYC is estimated to be worth more than 1 trillion dollars (e.g. by the property tax assessors). Not sure how much can be attributed to transit system, but half is probably not a crazy guess.

TWAK · #18 Posted **Jun 4, 2021, 2:55 AM**

Quote:

Originally Posted by SIGSEGV

The total amount of real estate in NYC is estimated to be worth more than 1 trillion dollars (e.g. by the property tax assessors). Not sure how much can be attributed to transit system, but half is probably not a crazy guess.

The fact that it's land and ROW gives it added value and it would be interesting to see if there is an "urbanized" former ROW somewhere. Instead of a former rail line being a bike path, it would be filled with slim developments.

JManc · #19 Posted **Jun 4, 2021, 6:30 AM**

Quote:

Originally Posted by UrbanImpact

Yup, the ticket prices for the Brightline private high speed train line here in South Florida are steep with their +/- $15 one way tickets from Miami to West Palm Beach, but, the trains and stations are super nice.

That's actually not that bad considering the distance.

iheartthed · #20 Posted **Jun 4, 2021, 2:34 PM**

Quote:

Originally Posted by SIGSEGV

The total amount of real estate in NYC is estimated to be worth more than 1 trillion dollars (e.g. by the property tax assessors). Not sure how much can be attributed to transit system, but half is probably not a crazy guess.

That's for Manhattan, not all of NYC. And I think it's closer to $2 trillion now.