Although they are an iconic tourist attraction, the cable cars are a huge money loser for the San Francisco Municipal Transportation Agency. To stem the losses, SFMTA should turn the cable car system over to a private operator who could both preserve this beloved resource and run it profitably.
In the 2023 fiscal year, the San Francisco Cable Car system experienced operating losses of $55 million despite charging a much higher standard fare than other Muni services. Losses may have been lower in 2024 due to a ridership rebound, but passenger numbers have declined in recent months.
The losses are nothing new and cannot be attributed to Covid-19 or its after-effects. In fiscal year 2019, cable car operating expenses exceeded fare revenue by $46 million. Operating losses understate the full cost to the SFMTA because the system requires significant capital investment.
While the cable car drains resources from SFMTA, it does not provide essential transit service. Buses charging much lower fares run along adjacent streets. For example, the California Street cable car is one to two blocks away from the 1 California bus, which uses Sacramento and Clay Street downtown.
Instead, the cable car is primarily a tourist attraction, and as such, should not suffer significant operating losses. Under Jeffrey Tumlin, SFMTA suggested terminating service to save money, but that would have violated the city charter and further disappointed tourists who are already experiencing a lack of retail and adverse street conditions downtown. Then Mayor-Elect Daniel Lurie wisely rejected the idea.
A better option is to sell or lease the cable car system to a private operator who could adjust fares and service levels to optimize returns. Because the charter specifies operating hours (albeit imprecisely), it may still need to be revised to accommodate private operations.
The key driver of the cable car’s unprofitability is its high cost of labor. Salaries and benefits accounted for 92 percent of San Francisco cable car expenditures in the 2023 fiscal year. Of the $25.31 cost per passenger trip that year, $23.36 was labor-related.
As a tourist attraction, the cable car should not suffer significant operating losses.
Cable cars are especially labor-intensive because each one requires two Muni employees: one to start and stop the vehicle, and another to collect fares. And cable car staff are expensive to employ, with base salaries ranging up to $46 per hour plus health and retirement benefits.
Although a cable car operator works 40 hours per week, an experienced transit employee is entitled to 15 paid holidays, 20 paid vacation days, and 13 paid sick days annually, as specified by city policies and the union’s memorandum of understanding. The all-in cost of employing a cable car operator works out to around $70 per service hour.
When cable cars are fully loaded with sixty passengers (seated and standing), they may generate enough revenue to compensate the two onboard employees as well as SF Muni’s support staff. But ridership varies by time, day, and season. A break-even operation may be possible if service is only offered at peak times; however, the City Charter requires Muni to run cable cars for the same hours it did in 1971, which was approximately every day, including weekends.
A private operator would likely optimize service hours ad attempt to utilize nonunion labor. In addition to a charter amendment, privatization may also require an agreement with the Transport Workers Union. One possibility would be to buy out some of the unionized employees who currently operate cable cars as part of any purchase or lease arrangement.
Consideration might also be given to allowing the private operator to provide amenities at the cable car terminals, such as the Powell Street turnaround. This would produce supplemental revenue, thereby increasing the potential acquisition price. It would also create an incentive to improve street conditions at points where tourists often congregate.
A private operator offering service only at peak times, potentially at a higher price and with nonunion labor should be able to continue offering one of San Francisco’s favorite tourist amenities while helping to balance Muni’s budget.