Transportation headlines, Friday, September 13

Here is a look at some of the transportation headlines gathered by us and the Metro Library. The full list of headlines is posted on the Library’s Transportation Headlines online newspaper, which you can also access via email subscription (visit the newspaper site) or RSS feed. Have a transportation-related article you want included in headlines? Drop me an email!

And don’t forget, Metro is on Twitter, Facebook and Instagram. Pick your social media poison!

Victims of 2008 Metrolink crash honored with memorial (L.A. Times)

The crash five years yesterday in Chatsworth claimed the lives of 25 people aboard a Metrolink train and was the result of a Metrolink engineer who missed a red signal because he was text messaging. The memorial states is simple: “Metrolink 111, September 12, 2008, In memory of those who left us. In honor of those who survived.”

Bergamot area plan approved by Santa Monica City Council (Santa Monica Daily Press)

The plan will re-zone 142 acres of what is currently an industrial zone on the eastern side of the city — and near the future Bergamot station for the Expo Line. Under the plan, taller buildings with residences can be built and there will be more commercial properties as well as some new streets, parks and bike lanes. Critics say the plan allows too much density that will inevitably lead to more traffic while proponents argue the plan will bring much needed housing and help with economic growth — all near the region’s growing transit system.

I think it’s a great move by Santa Monica. Sure, there will be more density — but it’s the kind of mixed density that means residents will likely have to drive less (for those who choose to drive) and they will have more mobility options than their counterparts in the suburbs. Sure, there may be some changes to traffic in the area. But the pros sure seem to outweigh the cons when it comes to livability and Santa Monica has shown it understands one great truth: not to grow is to shrink.

The unique genius of Hong Kong’s public transportation system (The Atlantic)

20130913-115116.jpg

A slice of the MTR’s website that emphasizes the MTR’s shopping destinations.

A nice primer on the corporation that runs transit in Hong Kong and elsewhere and managed to turn a $2-billion profit last year.

Two billion? What the what? Excerpt:

How can Hong Kong afford all of this? The answer is deceptively simple: “Value Capture.”

Like no other system in the world, the MTR understands the monetary value of urban density—in other words, what economists call “agglomeration.” Hong Kong is one of the world’s densest cities, and businesses depend on the metro to ferry customers from one side of the territory to another. As a result, the MTR strikes a bargain with shop owners: In exchange for transporting customers, the transit agency receives a cut of the mall’s profit, signs a co-ownership agreement, or accepts a percentage of property development fees. In many cases, the MTR owns the entire mall itself. The Hong Kong metro essentially functions as part of a vertically integrated business that, through a “rail plus property” model, controls both the means of transit and the places passengers visit upon departure. Two of the tallest skyscrapers in Hong Kong are MTR properties, as are many of the offices, malls, and residences next to every transit station (some of which even have direct underground connections to the train). Not to mention, all of the retail within subway stations, which themselves double as large shopping complexes, is leased from MTR.

The profits from these real estate ventures, as well as that 85 percent farebox surplus, subsidize transit development: proceeds pay for capital expansion as well as upgrades. The MTR’s financial largesse means that the transit system requires less maintenance and service interruptions, which in turn reduces operating costs, streamlines capital investments, and encourages more people to use transit to get around. And more customers means more money, even if fares are relatively cheap: most commutes fall between HK $4 and HK$20 (about 50 cents to $3), depending on distance. (In London, by comparison, a Tube journey can cost as much as $18). Fare increases in Hong Kong are limited by regulations linking fares to inflation and profits, and the territory’s government recently started giving a HK $600-per-month travel stipend to low-income households, defined as those earning less than HK $10,000 a month.

Read the entire article which makes it clear how different the MTR model is from public agencies such as the New York subway or Metro here in L.A. County. One huge difference: MTR gets to be a developer. Metro can work with developers on a few properties it owns but the agency is great curtailed when it comes to real estate activities — which, I’m guessing, many taxpayers prefer.

Categories: Transportation News

10 replies

  1. Correction in the article: HKMTR is not a transit “agency.” It’s a transit “corporation.”

    HKMTR is a joint-stock for profit corporation that is owned both by the HK government as well as private investors. They are allowed to go into profit making ventures.

    HKMTR is a publicly listed corporation on the HK Stock Exchange with a ticker symbol of 66
    http://www.hkex.com.hk/eng/invest/company/quote_page_e.asp?WidCoID=66&Month=1&langCode=e

    It makes profit because it is allowed to make profit as a joint government-private corporation listed on a public stock exchange where private investors and individuals are freely able to buy, sell, and trade their stocks and earn dividends.

    LA Metro is a 100% taxpayer funded agency, like the LADWP, LAPD, LAFD, as well as other municipal and county agencies. No one owns LA Metro “stock” and no one reaps in the benefits or a share of “profits” of LA Metro. It has no for profit business scheme.

    If LA Metro wants to become like HKMTR as well as other transit agencies in Asia where they all make profit, perhaps LA Metro can issue a solid profit making business plan that investors and individual will actually consider buying LA Metro and go public with an IPO on the NYSE?

  2. I attended the dedication in Moorpark yesterday for about 10 minutes after train 115 came in. It was very well done and nice. A very tragic accident indeed, which should reinforce the dangers of texting and driving, regardless of it being a train or car. The silver lining of it however is that the Chatsworth accident accelerated the PTC movement which will prevent another accident like this from happening again. Thoughts and prayers with the families as always, and huge thanks to the first responders on scene that day.

    There is also a memorial at the Simi Valley Metrolink station, which is very very nice and one of the best memorials I’ve seen.

  3. @ P Hunter
    You should read the subsequent graf from the article:

    “This model of transit management works partly because Hong Kong is a closed system: There are no suburbs from which people can commute by car, so there are strong incentives for everyone within the territory to use the system. This feature, combined with other regulations, has kept car ownership low: 6 of every 100 vehicles in Hong Kong are for personal use, whereas the number in the U.S. is closer to 70.”

    LA ≠ HK

  4. The correct economic terminology of losing money on one market by making money on the other is called “loss leader.” And this idea is not unique either. This concept has been in use in markets all over the world. For example, ink jet manufacturers sell ink jet printers at a loss and they make profit from ink jet cartridge sales. Auto manufacturers, especially during year end clearance sales, sells cars at a loss and try to recuperate profit from those dealer maintenance packages.

    LA Metro can actually do some of that today with a simple change in gaming strategy. LA Metro owns Union Station and the rent earned from stores inside Union Station is a huge revenue gain for Metro. In addition, people buy stuff at the stores inside Union Station which promotes additional sales tax revenue growth. Why not do exactly that to all of Metro Rail stations? There’s no law stating LA Metro can’t get revenue from Union Station operations. People and taxpayers are fine with that idea. In fact, LAWA does exactly that by collecting rent revenue from all those airport retail stores and LA County as a whole benefits from all the sales tax revenue being spent from the stores inside LAX.

    Who says the same strategy can’t be applied for all the other Metro Rail stations? If Metro wants to make more money, then make better use of their stations to make more money. Simple!

  5. It is too bad SM is going to put in new streets, this was a chance to put in a real ped-freindly area, and when in housing is marketed, it would attract costumers who are really interested in a car free or care lite lifestyle. They could have streets, but that are only open to maintenance and delivery vehicles and gated otherwise. All this would need to be high density to attract lots of pedestrains, and if there are no streets, were is the traffic going to come from? The residents could have one big parking garage in the corner for their cars, and rent could be charged for the spaces and the rent could be more than the $70 a month metro pass.

  6. MarkB,

    I think LA is becoming like HK.

    For example, take a look at the Westside. Century City, UCLA, Santa Monica, Palms, Venice, Culver City, Marina del Rey, Playa Vista, more and more of these places where at one point in time were considered to be “suburbs of LA” are becoming mini-zones of higher density, walkable urban development.

    Sooner or later, higher density construction has to happen in LA as more people come here and there are no more open spaces left to develop. People here are already struggling to pay higher rent and can’t even afford to buy homes here because of supply and demand issues.

  7. @ Simple economics

    The point about HKMTR and others in Asia (e.g. Singapore MRT, Taipei MRT, Tokyo Metro) is not just that they collect rent from retail stores in the train stations – that’s chump change. All these corporations engage in extensive real estate developments. They own the buildings that are often sitting on top of the subway stations and derive most of the profit from real estate transactions – buying and selling, as well as leasing properties around, on top, under or actually in the train stations.

    To put it in an LA context, Metro had to sell the land it acquired at Vine Station for construction staging of the Red Line to a developer, which build the W Hotel and condo. If this was in Hong Kong or Taipei or Singapore, Metro would build the W Hotel and condo and reap the profit from selling the condos. You can make similar examples from the Western station, Highland station, or Culver City station… Metro would make a lot more money if it was allowed to develop those site rather than sell the land to developers.

    LA Metro cannot engage in this kind of real estate development because it is not a for profit corporation. It is a State-funded, county operated public agency whose purpose is to build and operate transits.

  8. How about we private LA Metro and IPO it, make every Angeleno who paid taxes become shareholders, let LA Metro become a real estate developer like Asian transit agencies, and when it starts making profit, everyone gets rich?

    I’m down for it.

  9. I doubt most Americans put faith and trust government enough to actually share their profits for the public good. Even if LA Metro were allowed to operate at a profit by expanding their business to real estate ventures, majority of the profits will end up in the hands of special interest groups like securing additional funding for public employee pensions.

    Special interest groups control too much of politics today. Having a co-ownership model between government, tax payers and private investors might be able to curtail the power of them.

  10. Maybe LA should figure out how Hong Kong is able to achieve a 185% farebox recovery ratio before trying to move onto other ventures? The people and investors of HK have faith in HKMTR to make money in real estate because they are successful in operating the rail system with a 185% farebox recovery ratio.

    NYMTA, let alone LA Metro, let alone any of the US transit agencies barely achieve full farebox recovery ratio. The ability of mass transit being able to achieve over 100% farebox recovery ratios like most Asian transit agencies is a completely alien concept to American transit agencies. The problems is not because US transit agencies aren’t property developers, it’s just that they have absolutely no idea how to run public transit efficiently and for profit.

    Besides, how are you going to convince any investor to buy public transit stocks if the people in charge of running it has no clue how to run things at a profit? “Trust me, we’ll make money on real estate” is NOT going to cut it for investors. They need to show proof to investors by making profit in mass transit first.

    So before LA Metro even talks about going into the real estate business, they should look at the reasons why and how Asian transit agencies are running transit to achieve over 100% farebox recovery ratios. Farebox recovery comes from farebox revenue alone, not from real estate ventures. Is it the controlled and regulated distance based fare model that they are using? Is it the practicality of running things in a gated system to prevent freeloaders? Is it better use of their own transit stations? Better planning? Better coordination? Better contactless card systems? All of these have to be factored in.