With the implosion of Wall Street—and by extension, a good chunk of New York City’s economy—you can bet they’re getting pretty creative in the municipal budgeting department these days. Such an environment could mean considering ideas that were previously inconceivable: for example, selling the Metropolitan Transportation Authority’s New York City Transit, the city’s subway and bus system. It’s not as if there aren’t buyers out there who, in these tough times, would relish a business with loyal customers—in other words, those people who are taking the 7.6 million rides a day, or 2.6 billion rides a year, that the transit system provides. Though any sale would be fraught with political, technical, and financial challenges, we asked Sanjeev Arora, CEO of Chicago-based Pipal Research Corp., a provider of customized business analysis, to help us figure out how much the city might potentially bring in. By playing around with key variables—including ridership levels, fares, and revenue from the ads inside subway cars and on buses—his team arrived at three very distinct values.

Mr. Middle of the CarWe started by looking at the MTA’s five-year budget, which gives the authority’s expectations for revenue and operating costs. Pipal Research assumed a healthy 10 percent annual growth in advertising revenue and a 2.5 percent growth in ridership. The MTA is hoping for a fare increase in 2010, but the Pipal team believes that it is smarter to forecast no fare increase. With those assumptions in place, Pipal arrives at a ballpark value of $9.6 billion.
Estimated value: $9.6 billion

The PessimistThe pessimist thinks that even the most enduring of advertisers—Dr. Zizmor, for example, whose ubiquitous skin-treatment come-ons have been in the city’s subways for more than 25 years—will cut back on spending as the economy hits the skids. Factor in a mere 5 percent annual increase in advertising revenue, and suddenly the transit system doesn’t look like such a brilliant investment after all. Assume only a modest increase in ridership revenue, and its value drops to somewhere in the vicinity of $7.3 billion.
Estimated value: $7.3 billion

The OptimistAs commuters and tourists avoid taxi fares and parking fees, ridership may actually grow more than the MTA expects. Moreover, look at the creative steps Hong Kong and other cities have taken to juice their transit-system income with audiovisual presentations and exhibition sites. Pipal thinks a creative owner might be able to make up for ad-market softness with new revenue sources and possibly see a huge jump in earnings. In this bright future, you’re talking about a value approaching $25 billion.
Estimated value: $25 billion

Bottom LineLet’s be realistic: It’s hard to find optimists these days. With credit so tight, even the most aggressive bids would most likely be close to the low end of the spectrum. Our guess? If Mayor Michael Bloomberg actually put a for sale sign on the subway, the first bid would come in at about $7.5 billion.
Estimated value: $7.5 billion to $8 billion