Privatize the New York City Ferry

New York City is known for its subway system, but local commuters and visitors know that the city, being located on water, also has an extensive ferry network. Part of this network is financed by private funds: of which the New York Waterway system (which primarily connects the New Jersey waterfront to Manhattan) and a handful of other nearby private operators. The rest of the ferries are state-funded and stay within the city border, connecting different boroughs.

Most of these publicly funded routes have low ridership and are expensive to operate. Metro New York City therefore serves as something of an A/B test for public versus private results, with the two models taking place on the East River and Hudson River respectively.

In the late 2010s, New York City Transit began operating several public ferry routes branded New York ferry. The city has long operated a ferry between Lower Manhattan and Staten Island, but this has represented a significant expansion, with new routes running from Manhattan to locations in the Bronx, Brooklyn, the Rockaways and northeast Queens. There have been calls to open additional connections, like between southeast Brooklyn and Staten Island.

The city-run service, however, is heavily subsidized. According to the Citizens Budget Commissionthe NYC Ferry system’s per-ride subsidy of over $9 is significantly higher than most other transit methods (yet the fare is equal to the subway, whose subsidy per passenger is just over $1). The cost per trip was $13.83 in 2019, twice as much as the Staten Island Ferry, and the cost per trip for a proposed route to Coney Island would have been $24. Passenger numbers on the new routes are also low, according to CBC, with just over 4 million total rides in 2018, compared to 8 figures for the Staten Island ferry, buses and commuter trains, and billions annual metro journeys.

The Second Avenue Sagas Transit Blog to analyse the proposed route to Soundview in the Bronx before launch, and found that it would require an annual operating subsidy of $6 million and $20 million in capital investment, while attracting only 1,500 users dailies – “the same number that might suit [in] a subway train during rush hour.

Even when demand is high, ferries are a capital-intensive means of transport. Their ridership base is generally limited; as transit planning consultant Jarrett Walker observedsuccessful ferries rely on a combination of very intense land use within walking distance of each terminal, direct routes and the absence of a higher capacity competitor such as a railway line or a bridge.

These factors help explain, conversely, why ferries have been more successful on the New Jersey side. In recent years, New Jersey’s waterfront has grown significantly…Hoboken, for example, grew by 80% from 1990 to 2020while Jersey City has grown 18% since 2010. NY Waterway routes compete with the higher-capacity PATH train, but the routes provide faster service to parts of Manhattan farther from PATH, including some parts of the Financial District and the Hudson Yards Complex growth on the west side of Manhattan.

Actually, NY Waterway was originally planned by the founder Arthur Imperator Sr. as a vertically integrated operation that would include real estate development and ferry service operations around the stations. Although this ambitious proposal ultimately fell through, ferry service continued and ridership fell from dismal initial levels to 30,000 a day before the pandemicand 60,000 per day at one point. NYC Ferry, by comparison, got just over 14,000 runners per day before the pandemic.

The other crucial difference is that unlike NYC Ferry, NY Waterway is privately owned. That’s not to say it’s a total free market model—it’s received New Jersey sales tax revenue through 1996, its last mile shuttle service is partially funded by the federal government, and he received loans from the government and emergency grants. This too operates certain services in upstate New York under contract. More importantly, he received patronage from the Port Authority, according to to several competitors who wanted to follow similar routes. But the New Jersey-Manhattan routes and others in the region that are privately run operate on market demand; their fares are higher than NYC Ferry and in some years these companies make a profit.

For the New York City Subway to build on the relative success of the NY Waterway, we suggest a number of market-based reforms similar to what we have suggested in this column for other transit modes. The first would be to liberalize the ferry market on both sides of the borough of Manhattan, so that no public or private entity is favoured. This could lead to a number of new competitors driving down prices; and at the very least would encourage more private companies that New York could contract with (currently NYC Ferry is operated by Hornblower Cruises).

The second is to encourage land intensity around existing terminals. Imperatore argued that the reason the service to Brooklyn and Queens has consistently failed has to do with a lack of waterfront development. For the service to succeed, it would require financial support for the ferry service from developers, some sort of “value capture” which is already somewhat common with rail transport. This, more than anything, would highlight the difference between private and public ferry models: the former is based on finding the most intense demand, while the latter is based on political unrest and lacks built-in incentives to maximize service.

This article featured additional reports of Market Town Planning Report Ethan Finlan, content staff member.

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