There is really no denying that transportation makes money. Just consider the huge shopping malls perched around interstate off-ramps, the office parks positioned close to airports, the skyscrapers next to subway stations. But transportation itself is usually a money loser. We pour billions of public dollars into highways, airports and transit systems, while others, the home builders, the department store mavens, make the money that comes slows from those public investments.
Hong Kong’s metro system, MTR, has changed this equation, and that is why it’s worth looking at.
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. The Hong Kong’s metro system has been in the news in the New York city region because the chief of New York City’s transit agency, the Metropolitan Transportation Authority, shocked the region by announcing his departure to lead Hong Kong’s system for a million-dollar plus annual salary. He left at a particularly bad time, breaking a seven-year contract just as the MTA was facing yet another round of funding gaps and necessary cuts.
Given the perennial money-losing nature of most transportation departments, from highways to rail, it bears asking: how does Hong Kong do it?
The answer is that Hong Kong’s MTR doesn’t let private developers be the only ones that perch lucratively next to its stations. It builds its own 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.
Hong Kong’s MTR is unusual in also actually making money from its fares as well. How it can do this relates in part the uniqueness of running trains on an intense few strips of land filled with development. But for our purposes it’s worth looking at its actions as a developer, and that as a model for transportation agencies and departments in this country.
By many standards, MTR is an unusual company. The MTR only began service in 1979. But once cash was flowing (through development around stations), the government “graduated” MTR to become a private company, still majority-owned by government, so that it could raise funding through capital markets and more nimbly enter into joint ventures with private investors.
In 2000, the Hong Kong government converted the public MTRC into the private MTR Corporation Limited (MTRCL), although the government maintains a majority stake. Shares are traded on the Hong Kong stock exchange. Wikipedia reports that MTR also invests in railways in different parts in the world, and has obtained contracts to operate rapid-transit systems in London, Stockholm, Beijing, Shenzhen, and Melbourne.
[Editor's insert: Recently, Rem Koolhaas, the designer of the Seattle downtown Library, won a contract to do an overhaul of the MTRC design strategy and branding, as well as to design two new transit stations as prototypes. According to one article, "OMA’s design for the two stations will ... include a rethinking of all the elements of a station: its engagement with the street level, its connections, concourses, and platforms, station furniture, circulation and way-finding, and MTR’s visual identity." Koolhaas has an office in Hong Kong and is also working on a culture project in West Kowloon.]
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