A Public Transit System That Works

Compared to most American systems, London's is a model of efficiency and fiscal prudence.

by John Martin / April 7, 2015

Across the country, state and local governments spend billions every year to operate transit systems. And those are only the direct costs. The toll that poor service takes on a local economy can be even greater, as Boston-area residents know only too well in the wake of the virtual collapse of their transit system in the midst of the snowiest winter on record.

Even when weather isn't a problem, many American transit systems are beset by a vicious cycle of poor service, low ridership and financial troubles -- each of which reinforces the others.

Perhaps we should take a look at London's system, where ridership is up and delays are down despite a recent cut in the system's operating subsidy. Last year, Transportation for London spent $6.8 billion on mass transit services while bringing in $4.8 billion in revenue. That means that the London system is recovering about 70 percent of its operating costs. Few American systems recover even half.

One reason is that London's fares go up every year, though recent increases have been small enough to essentially remain unchanged in real terms. The keys are that riders see tangible improvements for their money and there is a culture in which investing in financial stability is viewed as prerequisite to a high-quality system. Helping to soften the blow for the system's neediest riders is a complex fare system based on mode of transportation used, length of trip and time of day.

Although fares are responsible for 86 percent of system revenues, London also pursues other revenue sources aggressively. The system sells advertising, develops its land holdings and rents space in and around stations.

And there is, as London's colorful Mayor Boris Johnson puts it, "a relentless focus on efficiency." Decisions on expansions or service upgrades are based on whether revenue from increased ridership is projected to offset higher service costs. When the subway system begins 24-hour weekend service this year, projections are that it will be financially self-sufficient.

As part of the drive to improve productivity and reduce costs, the London system set a goal of saving about $200 million through efficiencies last year. It actually saved more than $275 million. Technology is responsible for a significant part of the savings. The system is moving toward driverless, fully automated subway cars. Contactless debit and credit cards can be used to pay bus fares, and the system will soon be in place for subways. Reducing barriers to riding and making it easier to pay translate into more revenue and decreased fare-collection costs, which are down from 14 percent of overall operating expenses to 9 percent.

London is more densely populated than most American metropolitan areas, and with 4.2 million daily weekday subway riders, using transit is ingrained in the culture. But American highways are growing more clogged by the day. If our mass-transit systems focused as hard on growing ridership by enhancing customer service, reliability, convenience and efficiency as London's system does, using transit would become a lot more popular here as well.

This story was originally published by Governing