Privatize the New York City Ferry
How New York proves the merit of private transportation
New York City is known for its subway system, but local commuters and visitors are aware that the city, being situated on the water, has an extensive ferry network too. Part of this network is privately-funded: including the NY Waterway system (which primarily connects the New Jersey waterfront with Manhattan) and a smattering of other nearby private operators. The rest of the ferries are publicly-financed and stay within the city border, connecting different boroughs.
Most of these publicly-financed routes have low ridership and are expensive to operate. Metro New York City thus serves as something like an A/B test for public versus private outcomes, with both models playing out on the East River and Hudson River, respectively.
In the late 2010s, New York City Transit began operating several public ferry routes under the brand name NYC Ferry. The city has long operated a ferry between Lower Manhattan and Staten Island, but this 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, such as between southeast Brooklyn and Staten Island.
The city-run service, though, is highly subsidized. According to the Citizens Budget Commission, the NYC Ferry system’s per-ride subsidy of over $9 is significantly higher than most other methods of transit (yet the fare is equal to the subway, whose per rider subsidy is just over $1). The per-trip cost was $13.83 as of 2019, twice as high as the Staten Island Ferry, and the per-trip cost for one proposed route to Coney Island would’ve been $24. The number of riders on the new routes is also low, CBC finds, serving just over 4 million trips total in 2018, compared to 8 figures on the Staten Island Ferry, buses, and commuter rail—and billions of annual trips on the subway.
The transit blog Second Avenue Sagas analyzed the proposed route to Soundview in the Bronx before it launched, and found it would require a $6 million annual operating subsidy and $20 million in capital investments, while only attracting 1,500 daily users—“the same number that could fit [in] one peak-hour subway train.”
Even when demand is high, ferries are a capital-intensive form of transport. Their ridership base is typically limited; as transit planning consultant Jarrett Walker observes, successful ferries rely on a combination of very intense land use within walking distance to each terminal, direct routes, and lack of a higher-capacity competitor such as a rail line or bridge.
These factors help explain, conversely, why ferries have been more successful on the New Jersey side. In recent years, the New Jersey waterfront has grown substantially—Hoboken, for instance, grew 80% from 1990 to 2020, while Jersey City grew by 18% since 2010. The NY Waterway routes do compete with the higher capacity PATH train, but the routes provide faster service to parts of Manhattan that are further from PATH, including some parts of the financial district and the growing Hudson Yards complex on Manhattan’s west side.
In fact, NY Waterway was originally envisioned by founder Arthur Imperatore Sr. as a vertically-integrated operation that would include real estate development and ferry utility operations around the stations. While this ambitious proposal ultimately failed, the ferry service continued and ridership grew from dismal initial levels to 30,000 per day pre-pandemic, and 60,000 per day at one point. NYC Ferry, by comparison, got a bit over 14,000 riders per-day pre-pandemic.
The other crucial difference is that, unlike NYC Ferry, NY Waterway is privately-operated. That isn’t to say it’s an all-out free-market model—it received sales tax revenue from New Jersey until 1996, its last-mile shuttle service is partially funded by the federal government, and it has received government loans and emergency subsidies. It also operates some services in upstate New York under contract. More crucially, it has received favoritism from the Port Authority, according to a number of competitors that wanted to follow similar routes. But the New Jersey-Manhattan routes and others in the area that are privately run operate based on market demand; their fares are higher than NYC Ferry and some years these companies turn a profit.
For metro New York City to build on the relative success of NY Waterway, we suggest a number of market-based reforms akin to what we’ve suggested in this column for other modes of transit. First would be to liberalize the ferry market on both sides of the Manhattan borough, so that no one public or private entity is favored. This might lead to a number of competitive upstarts that drive prices down; and at the very least, would foster more private firms that New York City 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 service to Brooklyn and Queens has historically been unsuccessful relates to a lack of waterfront development. For service to be successful, there would need to be financial backing for ferry service from developers—a sort of “value capture” that is already somewhat common with rail transit. This, more than anything, would highlight the difference between private and public ferry models: the former is based on seeking the most intense demand, while the latter is based on political agitation and is devoid of built-in incentives to maximize the service.
This article featured additional reporting from Market Urbanism Report content staffer Ethan Finlan.