Sustainable urban rail funding: Insights from a century-long global dataset

Abstract

In recent years, urban rail funding has become an increasing concern in some western cities. The underlying issues over ridership and funding has largely been driven by trends such as increasing teleworking and new transport modes like ridesharing, which are likely to further exacerbate funding issues in the aftermath of the worldwide health crisis. This paper contributes to the discussion through the examination of funding within urban rail transport, specifically the strengths and weaknesses of mechanisms that can be used to achieve sustainable, stable long-term funding. A unique, very long-term historical dataset of five large metros around the world was collected for this research, with the analysis based on evidence of actual practices, from a relatively rare organisational perspective. Key results include: i) appropriate fare-setting has been critical for long-term financial health, but is vulnerable to inflation effects and political interference; indexing is important but use of consumer prices has led to revenue erosion in real terms, since wage growth is typically higher. ii) How subsidies are generated can have varying impacts on funding stability and sustainability — dedicated taxes and cross-subsidies from road charges are typically better than direct grants as they are secured by legislation; they also reduce political changes and avoid competing claims from other types of government spending (health, education), as compared with grants. iii) Commercial revenue can be a valuable source for future growth, in light of increased resistance to taxation. Real estate-related revenues in particular can be substantial, as in Hong Kong and Tokyo, with historically faster growth than wages, while also capturing any further value increases from rail system improvements.